Preamble

The House met at Half past Two o'Clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

COTTON INDUSTRY WAR MEMORIAL TRUST BILL

Lords Amendments considered, and agreed to.

NOTTINGHAM CORPORATION BILL

As amended, considered; to be read the Third time.

Oral Answers to Questions — POLAND

Ambassador's Note

Mr. Piratin: asked the Secretary of State for Foreign Affairs whether he has replied to the Note forwarded by the Polish Ambassador to the Prime Minister on 15th April; and if he will inform the House of the terms of his reply.

The Under-Secretary of State for Foreign Affairs (Mr. Mayhew): Yes, Sir. A reply was despatched to the Polish Ambassador on 12th May, the terms of which will be circulated in the OFFICIALREPORT.

Mr. Piratin: Can the Under-Secretary state whether the Foreign Office acknowledges the statement made by the Polish Embassy to the effect that these Polish troops are still in uniform and wearing badges appertaining to the Polish Republican Government and whether steps are being taken to abandon that position?

Mr. Mayhew: Perhaps the hon. Gentleman will read the reply, which is very long.

Following are the terms of the reply.

YOUR EXCELLENCY,

In your Note JM/No. 34/88 of the 15th April you expressed the concern of the Polish Government at the continued existence of some units of the Polish Armed Forces under British Command and especially of those units at present outside the United Kingdom.

2. I have the honour to inform Your Excellency in reply that His Majesty's Government are no less anxious than the Polish Government that the demobilisation of all units of the Polish Armed Forces should be accomplished at the earliest possible moment. The difficulties are of a practical nature. In particular the desperate shortage of accommodation in this country has greatly complicated the formation of the Polish Resettlement Corps and the placing in employment of those men who do not wish to return to Poland and has also delayed the withdrawal of the Polish Armed Forces from Germany and the Middle East which is now being arranged.

3. As I am sure you realise, it is essential that the demobilisation of the Polish Armed Forces should take place in an orderly and regular manner; otherwise the economy of this country would be dislocated and the men demobilised would also suffer considerable hardship. This, as has been already explained to the Polish authorities, is the sole reason for the formation of the Polish Resettlement Corps for those who do not wish to return to Poland.

4. Meanwhile a great deal has already been done to disband the Polish Armed Forces and to encourage their repatriation.

5. As Your Excellency is aware, all Polish service men who have been, or will be, brought to the United Kingdom for demobilisation, are given the choice of volunteering either for repatriation or for enlistment in the Polish Resettlement Corps. Fifty-nine thousand, two hundred and thirty-nine Polish service men have up to the present date been repatriated to Poland and the rate of repatriation has now been raised, by agreement between our two Governments, to 15.000 a month. At this rate the number of men awaiting repatriation will be reduced to only a few thousand at the end of June. Volunteers for repatriation are coming forward at the rate of about 4,000 a month and repatriation will continue in close co-operation with the Polish authorities.

6. Meanwhile, 96,700 men of the Second Corps, i.e., almost all those who have not previously volunteered for return to Poland (together with over 10,000 of their dependants) have already been brought to the United 'Kingdom for disbandment. Many have, I am glad to say, since volunteered for return to Poland. About 2,500 Polish soldiers and airmen who have married Italians have been demobilised in Italy with effect from 1st May. The liquidation of the military prison to which you refer is being arranged by His Majesty's Embassy in Rome with the Polish Embassy there. The problem of Polish soldiers in Italy is thus virtually liquidated.

7. The Polish Armoured Division is at present being brought to the United Kingdom from Germany for disbandment, and their


move will, it is expected, be complete by the 1st June. His Majesty's Government intend in the same way to bring here the members of the Polish Armed Forces under British Command still in the Middle East, as soon as accommodation is ready for them and shipping can be arranged to bring them here.

8. The "Polish Military Liquidation Mission" and the unit of Polish military police in Brussels which you mention have been required for administrative purposes which Brussels was on the lines of communication of the Polish Armoured Division in Germany. They will thus no longer be required when the latter is withdrawn and their disappearance is imminent. Meanwhile, I have no evidence whatever to support the allegation mentioned in Your Excellency's note that the mission has been "spreading lawlessness" or "facilitating criminal activities" among Poles. Majesty's Government have received no complaints on this score and the object of the mission is precisely to aid our own authorities and the Belgian authorities in preventing such developments. If you have any precise evidence, I shall be glad to have it examined.

9. The publication "Orzel Bialy" to which you refer is, I understand, published by a Belgian firm. I am informed that it is not financed from military funds but is run on a purely commercial basis and none of its equipment is military property. Since you have drawn my attention to it, steps are being taken to confirm that none of the members of its staff retain any official connection with the Polish Armed Forces under British Command.

10. The Polish Mission of Liquidation in France which Your Excellency also mentions was set up in order to regularise the demobilisation in France of certain members of the Polish Armed Forces under British Command, who have had close connections with France. The number of Pole administered by it has already been reduced from many thousands to about 5,000. As soon as these few men have been disposed of, the Mission itself will be withdrawn.

11. The demobilisation of the Polish Armed Forces under British Command is being proceeded with as rapidly as the circumstances permit. It is in the British interest to reach as soon as possible thereafter a situation in which the members of the Polish Resettlement Corps have all either returned to Poland or been placed in civil employment here or overseas. It will, however, be obvious to Your Excellency that this must, inevitably, be a lengthy process.

I have, etc.,

(Signed) ERNEST BEVIN.

Polish Nationals, U.K. (Repatriation)

Mr. Thomas Reid: asked the Secretary of State for Foreign Affairs, how many Poles have been repatriated or sent back to the Continent from Britain since the end of the war; and how many are still in Britain.

Mr. Mayhew: Poles repatriated from this country to Poland or sent to other countries number approximately 71,000. Of these 67,000 have returned to Poland and the rest to other countries. The number of Poles remaining in Britain is about 163,000, of whom 35,000 are civilians, and over 25,000 are about to be repatriated.

Professor Savory: asked the Secretary of State for Foreign Affairs, whether he received in Warsaw any guarantee that no danger will threaten Poles who take his advice to return to their country from England, in view of the fact that political offenders in Poland are brought before military courts and the Warsaw authorities are over-ridden by the Soviet N.K.V.D still acting in Poland

Mr. Mayhew: No, Sir. Poles must make their own decision in this matter; but the existence of the amnesty is widely known. The amnesty has undoubtedly led to an easing of internal tension. I believe the return of the mass of Poles abroad to assist in the work of national reconstruction would be beneficial for their country and is certainly desired by the Polish Government.

Professor Savory: Is not the hon. Gentleman aware of the intense feeling of insecurity caused by the continued detention of many of the leaders of the Polish Peasant Party and the more recent arrest of the principal leaders of the genuine Socialist Party?

Mr. Mayhew: We have no evidence whatever of the implication in this Question that reprisals are being taken against Poles who return to their country and any such suggestions are, T think, not helpful.

Mr. Driberg: Will my hon. Friend do his best to see that his answer receives publicity in the Polish language newspapers published for Polish soldiers in this country, which usually try to avoid publishing answers of this kind?

Correspondents (Visas)

Major Tufton Beamish: asked the Secretary of State for Foreign Affairs whether he is aware that M. Jerzy Borejsza, who is head of the Communist-controlled newspaper co-operative "Czytenik," is visiting this country; that M. Borejsza has been and is responsible


to the Communist party in Poland for conducting the present Press campaign against this country; and whether he will seek an assurance from the Polish Government that it will show reciprocity in granting visas to British newspapermen and others with known strong anti-Communist views to visit Poland under conditions of equal freedom.

Mr. Mayhew: Yes, Sir; my right hon. Friend is aware of M. Borejsza's visit, but sees no reason to seek an assurance about reciprocity. So far as is known no British correspondents who have applied for visas to Poland have been refused them.

Oral Answers to Questions — PALESTINE (AMERICAN LEAGUE'S ACTIVITIES)

Major Bruce: asked the Secretary of State for Foreign Affairs whether he has yet received any indication from His Majesty's Ambassador in Washington as to the attitude of the U.S. Government towards the activities of the American League for a Free Palestine.

Mr. Mayhew: My right hon. Friend is still awaiting a reply from the State Department to the repeated representations which His Majesty's Embassy in Washington have made to them on this subject.

Major Bruce: Is my hon. Friend aware that the particular organisation which is referred to in the Question has pledged itself to raise £250,000 before 4th July in order to reinforce underground resistance against British law in Palestine?

Mr. Mayhew: Yes, Sir, we are aware of the activities and we are following them closely. We are making our views very plain to the State Department.

Mr. Driberg: Can my hon. Friend say whether this League is technically a charity and, therefore, subject to certain tax remissions, and, if so, does it not follow that the U.S. Treasury is indirectly subsidising the assassination of British soldiers in Palestine? Will he look at that aspect of the question?

Mr. Mayhew: We are aware of certain considerations of that kind which we are putting to the State Department, but I cannot accept all the implications in the supplementary question.

Oral Answers to Questions — FOREIGN SERVICE (LABOUR ATTACHES)

Mr. Geoffrey Cooper: asked the Secretary of State for Foreign Affairs what is the number of Embassies to which Labour Attaches have been appointed; what is the number of Embassies to which it is now intended to make such appointments; and how many of those who have been appointed have had first-hand experience in the British trade union movement.

Wing-Commander Millington: asked the Secretary of State for Foreign Affairs whether he is satisfied that His Majesty's Ambassadors abroad are adequately advised on labour questions; and whether he will consider the appointment of more Labour Attaches with experience of the trade union movement.

Mr. Alfred Edwards: asked the Secretary of State for Foreign Affairs how many labour attaches have been appointed; and, of these, how many have had first-hand experience of the British trade union movement.

Mr. Mayhew: Eighteen Labour Attaches have so far been appointed to His Majesty's Embassies and Legations abroad. Between them they cover 38 separate countries, a number of them having been appointed to more than one post. All of those appointed have been carefully selected for their knowledge and experience not only of the British trade union movement but also of industrial relations and social administration in general. My right hon. Friend is fully satisfied as to their qualifications for advising His Majesty's Representatives on questions arising within these fields. The case for making further appointments is kept under constant review by the Minister of Labour and by my right hon. Friend in consultation with the Chancellor of the Exchequer. Eight of the appointments have, in fact, been made within the last 12 months. A further appointment, to Tokyo, will be made very shortly.

Mr. Cooper: Can my hon. Friend give an assurance that in any future appointments that are made the same consideration as at present will be given to the people who have the necessary experience?

Mr. Mayhew: Yes, Sir.

Mr. Warbey: Can my hon. Friend say how many of the Labour Attaches have practical experience of the British trade union movement?

Mr. Mayhew: They have all very wide knowledge of the British trade union movement and some of them have intimate knowledge. Without notice I could not answer the exact terms of the question.

Oral Answers to Questions — GERMANY

Wilhelmshaven Dockyard (Dismantling)

Mr. Bramall: asked the Secretary of State for Foreign Affairs whether sufficient buildings will be left intact after the dismantling of Wilhelmshaven dockyard to enable firms which are desirous of setting up in Wilhelmshaven to find accommodation in order to employ the labour which has been rendered surplus by the closing of the dockyard which will be unemployed when dismantling ceases.

Mr. Mayhew: Yes, Sir.

Brigadier W. R. N. Hinde (Arrest and Release)

Sir Waldron Smithers: asked the Secretary of State for Foreign Affairs if his attention has been called to the arrest by the Soviet authorities of Brigadier W. R. N. Hinde in the British zone; if a formal protest has been made to the Soviet authorities; and if he will make a statement.

Mr.: Mayhew: Brigadier Hinde is an ornithologist. On Sunday, 11th May, while bird watching with field glasses at a point near the boundary between the British sector of Berlin and the Soviet zone of Germany, he was approached by a Soviet patrol and requested to accompany them to their headquarters. At the Brigadier's suggestion the party went to the Soviet Kommandatura's Headquarters in Berlin where it was realised that a mistake had occurred. An apology was made and the Brigadier released.

Sir W. Smithers: Why is any British subject allowed to be arrested in the British zone; does not the hon. Gentleman realise that the only policy the Soviet understands is one that is forceful and strong; and will he see that strong protests are made against any such incidents in the future?

Mr. Mayhew: That seems to be a fantastic comment on this particular incident. An apology was made and the Brigadier was released.

Sir W. Smithers: Why was he ever arrested?

Cotton Material

Mr. Skeffington-Lodge: asked the Secretary of State for Foreign Affairs whether, in view of the shortages in Germany and the dismay caused by the export from that country of approximately 6,000,000 metres of cotton material to Afghanistan and the Sudan by the British authorities, he will state the reasons for this action.

Mr. Mayhew: No such exports have been made. My hon. Friend may, however, be referring to the spinning and weaving in the combined British and American zone of 6,000,000 yards of cotton material intended for export to East Africa. The raw cotton for this material is being imported into Germany for processing and re-export.

Mr. Bramall: Will my hon. Friend take steps to see that the people in Germany who are spreading these stories are corrected and that an accurate statement is given wide publicity in the German Press?

Mr. Mayhew: Yes, Sir. I am grateful for questions of this nature which enable me to make corrections.

Unemployment

Mr. Skeffington-Lodge: asked the Secretary of State for Foreign Affairs how many of the 346,487 persons registered as unemployed in the British zone of Germany on 31st March, 1947, are repatriated prisoners of war.

Mr. Mayhew: The figures of unemployed in the British zone are kept by German labour offices; they do not show repatriated prisoners of war separately.

Fish Imports

Mr. Edward Evans: asked the Secretary of State for Foreign Affairs whether the Control Commission have yet completed their arrangements for the purchase of Norwegian herring; why similar arrangements have not also been effected with British producers; and if he will make a statement, in view of the apprehension of the herring industry in this country on the subject.

Mr. Mayhew: The British and American authorities, who are jointly responsible for the procurement of food for their two Zones, hope to conclude very shortly a contract for the supply of Norwegian herring during May and June. They are prepared to enter into a contract for the supply of British cured herring from June onwards. The question of a contract for British fresh herring is being pursued.

Mr. Evans: Is the hon. Gentleman aware of the anxiety in the fishing industry concerning the long delay in the placing of a contract by the Control Commission; is it a fact that this bipartite arrangement is working to the disadvantage of the English herring industry; and did not the Herring Industry Board base its plans for this year on the assumption that a considerable contract would be placed with the Control Commission, particularly for klondyked herring?

Mr. Mayhew: I agree about the anxiety in the British herring industry, but I think that my statement shows that considerable progress has been made and while negotiations are still under way I should not like to make any further comment

Mr. Evans: The Minister has already stated that a contract has been signed with Norway and surely it is most inequitable that British funds should be used for the purchasing of Norwegian herring when we in this country are quite capable of selling them and the contract has been hanging on now since the end of last year?

Mr. Mayhew: As I have said. we are prepared to enter into a British contract for cured herring and the question of a contract for fresh herring is being pursued. While the negotiations are under way, taking consideration of the cost—and the relative cost of British and Norwegian herrings is a relevant point—I do not think I can say more.

Food Situation

Mr. Piratin: asked the Secretary of State for Foreign Affairs how much grain has been collected in the British zone of Germany since the last harvest; how this total compares with the estimate of what should have been collected; and if he will account for the difference.

Mr. Mayhew: Receipts of bread grains from farms during the present crop year up to 15th April totalled 1,170,600 tons

or 91 per cent. of the expected saleable crop. Receipts of coarse grains have totalled 212,900 tons or 60 per cent. of the amount expected for the crop year. The difference is mainly due to the failure of the German food administration to collect the maximum amount of grain and to secure the proper reduction in the livestock population.

Mr. Piratin: What steps is the Minister taking to adjust the manner of working of the German food administration in order that the quota shall be fulfilled?

Mr. Mayhew: This question was dealt with in the Debate on Thursday. The big answer would be that we are giving the German economic agencies greater powers in these matters.

Mr. Skeffington-Lodge: Would not my hon. Friend agree that it is not fair to blame the Germans exclusively but that the general deficiency in imports is the major fact which has brought about a shortage of food in Germany?

Mr. Mayhew: The Question deals with the collection in the British zone and I have said that the deficiency is due mainly to the failure of the German administration.

Mr. Sorensen: asked the Secretary of State for Foreign Affairs whether he will make a further statement respecting the food supply in Germany; to what extent new supplies of food have become available; and what is the actual number of calories now available.

Mr. Mayhew: This matter was dealt with by my right hon. Friend in the course of the Debate on foreign affairs on Thursday last. A considerable number of grain ships are now arriving or due at German ports, and the delivery of available supplies to consumers is being accelerated. After this week it should be possible to issue in full that part of the ration which is met from imported supplies. The extent to which other supplies will be available will depend upon the effectiveness of the German Food administration in improving the collection and distribution of home grown food The British and American authorities are doing all they can to stimulate German efforts in this direction. During the past week the ration actually received by the normal consumer has provided, on the average, about 1,025 calories a day.

Mr. Sorensen: Can we take it that 1,025 calories is now the basis of calorific consumption in the British zone?

Mr. Mayhew: That was the normal ration in the past week.

Mrs. Leah Manning: Since in his, reply my hon. Friend, in referring to indigenous supplies, dealt only with distribution, may I ask whether there are production targets for this year's harvest?

Mr. Mayhew: Perhaps my hon. Friend will put down a Question on that point.

Mr. Ronald Chamberlain: Can the Under-Secretary assure us that he is doing his best to get in the greatest possible supply of fish, and particularly herring?

Mr. Mayhew: Yes, Sir. I have answered a Question about that. We are doing our utmost, and we agree in principle to the purchase of herring.

Mr. Edward Evans: Could not the calorific content of the German ration be increased enormously by a liberal supply of herring?

Mr. Mayhew: As far as calories go, the herring is an expensive and inefficient food as compared with bread.

Sir W. Smithers: Is not the root of the trouble the violation of the Potsdam Agreement by the Russians?

Mr. Skeffington-Lodge: Will my hon. Friend bear in mind that it will be a crime against humanity if the Allies allow the German people to sink into a slough of starvation, despair and distress?

Clothes-mending Articles

Mr. Sorensen: asked the Secretary of State for Foreign Affairs whether, in view of the difficuIty, and frequently the impossibility, of German people in the British zone securing needles and cotton and similar articles for mending clothes, he will take steps to secure a supply of these.

Mr. Mayhew: The provision of these articles is the responsibility of the German authorities, who through German executive committees, can bring their import requirements to the notice of the joint Export-Import Agency for the combined zones. So far no demands for imported supplies of these goods have come forward from the Agency.

Mr. Sorensen: Is my hon. Friend aware that the absence of these things imposes an extra hardship on the German people? Do I understand that no proposals have been made to facilitate the importation of these commodities not now made in Germany?

Mr. Mayhew: No proposals have been made.

Oral Answers to Questions — MIDDLE EAST AND NEAR EAST

Brigadier Low: asked the Secretary of State for Foreign Affairs which countries are included in the term "Middle East" and which in the term "Near East."

Mr. Mayhew: There appears to be no agreed definition of these vague geographical terms.

Brigadier Low: Since the hon. Gentleman and his right hon. Friends use these terms is it not a fact that they must know what they mean?

Mr. Mayhew: Where precision would be required, we should not use the terms.

Oral Answers to Questions — GERMANY AND AUSTRIA (DISPLACED PERSONS)

Mr. Butcher: asked the Secretary of State for Foreign Affairs when the report of the hon. Members for Uxbridge (Mr. Beswick), for North Wembley (Mr. Hobson), and for Lewes (Major Beamish), on the problem of displaced persons in the British zones of Germany and Austria was received; and when it will be published.

Mr. Mayhew: The hon. Members for North Wembley (Mr. Hobson), and Lewes (Major Beamish), reported on 7th March, and the hon. Member for Uxbridge (Mr. Beswick), who followed a somewhat different itinerary, reported separately on 17th March. These reports were not written with a view to publication.

Mr. Butcher: Can the hon. Gentleman indicate an earlier occasion on which a delegation composed entirely of hon. Members did not make a report for publication for the information of hon. Members of this House?

Mr. Mayhew: There would be no reason against publication with the permission of the hon. Members if that were strongly


desired. But, at the same time, to make all these reports available for publication might lead to a situation where the reports themselves lost some of their value.

Mr. Butcher: Will the hon. Gentleman approach the hon. Members in question and, if they are agreeable, arrange for publication to take place?

Mr. Mayhew: I am not sure that there is a strong demand for publication of this report.

Oral Answers to Questions — UNITED NATIONS DOCUMENTS

Dr. Haden Guest: asked the Secretary of State for Foreign Affairs whether he is aware of the long delay which occurs between the date of publication of reports and proceedings of U.N.O. organisations in the U.S.A. and their being made generally available to Members of Parliament and the Press in this country; and whether he will arrange for an adequate supply of these essential documents to be made available in this country immediately on publication.

Mr. Mayhew: A copy of every unrestricted United Nations' document is placed in the Library of the House as soon as it is received in this country. The delay in transmitting documents by air from New York has been reduced to a minimum, although there is at times a gap between a meeting at United Nations Headquarters and the issue of documents by the United Nations Secretariat. For reasons of expense it is not possible to carry very large quantities of documents across the Atlantic by air, and my right hon. Friend regrets that he cannot therefore undertake to supply documents for wide and immediate distribution.

Dr. Guest: Is my hon. Friend aware that the delay extends sometimes to six months; that the Food and Agriculture Organisation Report on the loan to Greece, which is of great interest, has been six months on the way; and that although the report of the Military Staff Committee of the Security Council—which I suppose is a document of worldwide importance—has been published for over a fortnight, there is only one copy in the Library? Does not my hon. Friend think that one copy in the Library is inadequate to supply all Members of Parliament and the Press?

Mr. Mayhew: Very often the delay is not in the transmission of documents here but between the meetings of the United Nations and the publication of the documents by the Secretariat. On the other hand, I undertake to look into the cases which the hon. Member has mentioned to see if anything can be done.

Major Bruce: Would my hon. Friend say what he means by "unrestricted documents"?

Mr. Mayhew: There are a very few documents of the United Nations which the Secretariat send restrictedly to the bodies of the United Nations concerned with these documents.

Major Bruce: Will my hon. Friend say whether such a practice of the United Nations Secretariat meets with the approval of His Majesty's Government?

Mr. Mayhew: I think it is a reasonable routine matter to send certain classes of documents to bodies which are dealing with the particular subject, but I should not like to commit myself to that without notice.

Mr. Eden: Can we have a little enlightenment on this matter? Does the Under-Secretary mean "restricted" because they are regarded as being of too secret a character for others to be informed, or does it mean that others are not likely to be interested in them?

Mr. Mayhew: I think it means documents peculiarly appropriate to certain bodies of the United Nations to which they are being sent. As I say, I should not like to commit myself without notice.

Dr. Guest: In view of the very unsatisfactory state of affairs revealed by this Question, will my hon. Friend make arrangements to have the publications reproduced and published by the Stationery Office? It would not be a costly business, and it would add very much to the knowledge available to the House of Commons.

Commander Noble: Is not the Under-Secretary aware that the word "restricted" is merely one point in the scale of which "top secret" is the highest?

Oral Answers to Questions — U.S.S.R. (VILNA BONDS)

Mr. Gammans: asked the Secretary of State for Foreign Affairs if he has made, or will make, representations to the Government of the U.S.S.R. regarding the payment of interest on the 5 per cent. bonds of the city of Vilna for the benefit of foreign bondholders in this country.

Mr. Mayhew: The Soviet authorities have consistently declined to meet any such obligations connected with the territories which they took over in 1939 and 1940. His Majesty's Government have made a general reservation of their right to claim compensation for the damage done to British interests in these territories, and the question of the Vilna bonds will not be overlooked when the time comes to make a general settlement of British claims and Soviet counterclaims connected with that area.

Mr. Gammans: Does that answer mean that as a result of the seizure of these Baltic Republics these loans have been repudiated? What are the Government going to do to protect the interests of the people in this country who lent money to Vilna in good faith some years ago?

Mr. Mayhew: When the time comes to make a general settlement of these questions the Vilna bonds will be taken into consideration.

Oral Answers to Questions — FOOD SUPPLIES

Maize and Meat Purchases (Argentina)

Brigadier Mackeson: asked the Minister of Food the average price of, respectively, one ton of maize and one ton of meat purchased by this country in the Argentine in 1938 and 1946 respectively.

The Minister of Food (Mr. Strachey): The approximate average prices per ton f.o.b. paid for maize in the Argentine were:—£6s. od. in 1938, and £18 4s. od. in 1946; for bone-in meat the average prices were £40 in 1938, and £60 in 1946.

Brigadier Mackeson: In view of that very considerable increase, is the Minister trying to persuade the Argentine Government to abolish bulk selling?

Mr. Strachey: No, Sir. I do not think it would serve any useful purpose if we told the Argentine how to run their economic affairs.

Mr. Baldwin: Can the Minister say what proportion of the price of maize is paid to Argentine producers?

Mr. Strachey: Not without notice.

Meat Supplies, Wycombe

Sir Stanley Reed: asked the Minister of Food whether he will inquire into the supplies of meat in the Wycombe district for the week commencing 5th May, which, although classed as first quality lamb, were so inferior that customers refused to take their rations; and what steps he is taking to ensure a better supply of meat to this district.

Mr. Strachey: About 10 per cent. at High Wycombe's ration meat for the week was Uruguayan spring lamb, which, although small, was of average quality. My Department knows of only one person who refused to take this meat as part of her ration.

Sir S. Reed: Will the Minister accept the assurance of a personal inspection that this meat was so far below standard that it was impossible for the butchers to cut it up into rations?

Mr. Strachey: No, Sir, that is not according to our information.

Miners' Rations

Sir W. Smithers: asked the Minister of Food why a miner who voluntarily absents himself from work gets the special miners' extra allocation of food

Mr. Strachey: Proposals to make rations depend upon attendance at work would be, in my view, both undesirable and impracticable.

Sir W. Smithers: Is the Minister aware that, in the Government's spiritual home in Russia, if men to whom work is offered will not work, they hold up the ration cards, and will he not follow their example for once?

Mr. Strachey: No, Sir, we do not intend to follow any of the examples pointed out to us by the hon. Member.

Mr. Walkden: Will my right hon. Friend never forget that those who were extremely willing to work under a Tory Government could get neither food nor a chance to work?

Mr. Speaker: I think we had better get away from these side issues and get on with the next Question.

Commander Agnew: asked the Minister of Food whether all miners working underground are now receiving coupons entitling them to draw extra rations of food.

Mr. Strachey: Yes, Sir.

Commander Agnew: While I thank the Minister for that very satisfactory reply, which the tin miners of Cornwall will be very glad to note—

Mr. Strachey: I thought the hon. and gallant Member meant coal miners. In the Question he refers to underground workers. It is perfectly clear that when the concession was made we were referring to coal miners.

Commander Agnew: Are we to understand that the Minister, having said that all underground miners were receiving extra food rations, is now restricting it to coal miners: further, are we to take it that his Department have not yet, because of their smaller numbers, heard of the existence of miners in any other occupations except coal; and will he address himself to the problem of giving them, in their arduous work, the extra rations which they need?

Mr. Strachey: Oh yes, Sir, we have heard of other miners, but it was stated very carefully in the course of Questions and answers at the time, that this concession was restricted to coal miners who, from the very much more dangerous type of work—[HON. MEMBERS; "No."] Yes, the very much more dangerous type of work—should have this concession.

Colonel Ropner: Does the Minister say that the extra food is to guard those miners against danger?

Mr. Strachey: No, Sir. It was considered that this concession should be confined to coal miners for very good reasons, one of the reasons being the arduousness and danger of their work. I am perfectly willing to repeat those arguments at a suitable time, but they have all been given to the House before.

Billeted Train Men. Westbury

Mr. Grimston: asked the Minister of Food what action he proposes to take to meet the grievances of train men compulsorily billeted away from their homes in railway coaches at Westbury who have

been obliged to surrender their ration books, with the result that they and their families are denied certain allowances under the ration which are enjoyed by the rest of the public.

Mr. Strachey: Railway men who live in hostels normally have to give up their ration books, but there are special features in the case of train crews, and the possibility of making exceptional arrangements is being considered in consultatior with the T.U.C. Advisory Committee

Mr. Grimston: Is the Minister aware that this grievance has been allowed to drag on for months, and will he take some initiative in getting the matter settled and the grievance redressed?

Mr. Strachey: I am meeting the Committee on 22nd May, and I hope to get the matter settled then.

Public Relations Staff

Wing-Commander Hulbert: asked the Minister of Food what is the number of public relations staff employed by his Department and the total annual salary and expense allowances paid to these officers; and what percentage this sum bears to the total cost of his Department's publicity.

Mr. Strachey: Sixty-five public relations staff are employed in my Department, at a total annual salary of £26,921 7s. 8d. No expense allowances are paid to any of these officers; normal expenditure on travelling and subsistence is repaid in accordance with the usual Civil Service rules. The expenditure on salaries represents approximately 5 per cent. of the total cost of the Department's publicity.

Wing-Commander Hulbert: Has any effort been made to reduce this unproductive staff?

Mr. Strachey: Yes, Sir; this number is a considerable reduction on the past number.

Points Goods (Rural Areas)

Mr. Butcher: asked the Minister of Food if he will reconsider the policy of his Department in penalising a trader late in completing returns of points goods sold, by giving him a smaller number than he sends in, as this practice adversely affects


the distribution of points goods in rural districts.

Mr. Strachey: My Department does not now impose this penalty. I will, however, look into any case of which the hon. Member will let me have details.

Ex-Servicemen (Points Capital)

Sir Robert Young: asked the Minister of Food if he is aware that the mother of ex-Sapper H. Lightfoot, R.E., kept in business on behalf of her son; that he was demobilised on 18th January, 1946, took over the business in February, 1947, and applied for an increase in points capital and was refused; and why this ex-Serviceman is not entitled to an increase under the scheme to assist ex-Servicemen taking over businesses.

Mr. Strachey: The fact that Mr. Lightfoot recently took over a business from his mother does not qualify him for a grant of points under the scheme for helping ex-Servicemen who re-open their own businesses. I am glad, however, to inform my hon. Friend that, on sympathetic grounds, a grant of additional points is being made.

Ram Roasting Fair, Kings Teignton

Brigadier Rayner: asked the Minister of Food if he will grant facilities for a ram to be roasted at Kings Teignton Ram Roasting Fair in accordance with custom on Whit Tuesday, 27th May.

Mr. Strachey: With regret, no, Sir.

Brigadier Rayner: Is the Minister aware that this old custom originated in the distant past as a thank-offering to the springs which flowed after a long drought? Is he aware that these springs still feed two mills which produce valuable flour for his Department, and that it is very unlucky, in peacetime, to interfere with old customs and traditions which have been prevalent for so long? Will he reconsider his decision?

Mr. Strachey: No, Sir, although I should very much like to supply the ram. The Fair has done without one for seven years, and it can do without one for a little longer.

Mr. Piratin: Is the Minister aware that

this is one of those heathen customs which the Conservative Party want to retain?

Brigadier Rayner: Is the right hon. Gentleman aware that last year permission was given for the ram to be roasted? Will he not admit that after another year of Socialist Government even this small concession has had to be withdrawn?

Mr. Strachey: I do not think it was the same ram, but I will certainly look into the matter. I understand that it was not given last year.

Asparagus from U.S.A.

Mr. Baker White: asked the Minister of Food what quantities per month of fresh carrots, asparagus and celery are being imported from the U.S.A.; and how much expenditure in dollars was involved in such purchases in the period 1st January to 30th April, 1947.

Mr. Strachey: During the first quarter of this year, the latest date for which figures are available, 3 cwts. of asparagus, but no celery or carrots, were imported from the United States of America. The value of the asparagus was about £10.

Carrots

Mr. Baker White: asked the Minister of Food what is the maximum retail price at which imported fresh carrots from the U.S.A. may be sold; and how this price compares with the maximum selling price of British-grown main-crop carrots.

Mr. Strachey: The price of new season's carrots, whether imported or home produced, is not controlled. The maximum retail price of home-grown maincrop carrots is 2d. per lb. in England and Wales.

Herbal Oils (Imports)

Mr. Baker White: asked the Minister of Food the volume and value of pepper mint, lavender, sage and spearmint oils imported into the United Kingdom in 1946; and the countries of origin of such imports.

Mr. Strachey: No, Sir. It would not be in the public interest to disclose this information.

Mr. Baker White: Why is it not in the public interest to disclose these figures?

Mr. Strachey: This information has never been given in connection with any of the commodities we import, for reasons


I have often given to the House. It is true that these are not very important commodities, but I think it would be wrong to make an exception in their case.

Whit-Week Rations

Mr. Rees-Williams: asked the Minister of Food whether, in view of the fact that food shops will be closed in the London area on Whit Monday and that the first day of the next ration period falls on Whit Sunday, he will issue instructions enabling those who desire to spend Whit-sun away from home to draw their rations for Whit-week at the end of the preceding week.

Mr. Strachey: I am afraid it is almost impossible to make coupons in respect of one four-week period valid for use during the preceding period.

Olive Oil

Mr. Vane: asked the Minister of Food what proportion of the 5,000 tons of olive oil for which the Greek Government has given authority for export has been obtained for this country.

Mr. Strachey: So far as I am aware none of this oil has yet been offered for sale. Our importers may be trusted to secure as large a share as possible of it for this country.

Mr. Walkden: In view of the fact that the Greek Government neither buy nor sell, and no one has any confidence in their currency, how does the right hon. Gentleman expect to get hold of any olive oil from Greece?

Mr. Strachey: The first thing is for the Greek Government to decide whether they will permit any of it to be exported. If and when they do, we will go about the job of procuring it, which may not be easy.

U.S. Wheat (Price)

T. Reid: asked the Minister of Food how the present price of U.S. wheat compares with the average price in 1946.

Mr. Strachey: The present price of No. 2 Hard Winter U.S.A wheat is about £27 16s. per ton f.o.b. A weighted average price for 1946 is not available, but prices ranged from £18 10s. to £24 per ton f.o.b.

Mr. Reid: Was the rise in price caused by the removal of price controls in the United States?

Mr. Strachey: One must not offer dogmatic opinions on economic causes in the United States, but I should think it was a most important factor.

Mr. Baldwin: In view of the prices just disclosed by the Minister, will he say what price has been paid to the English farmer for his wheat?

Mr. Strachey: Not without notice.

Prices (Family Expenditure)

Mr. Piratin: asked the Minister of Food whether he will give an estimate of the effect in expenditure on the average family of the increases and decreases in the price of foodstuffs since January, 1947

Mr. Strachey: Individual tastes vary so much that it is impossible to say what the effect on an average family would be. In the case of rationed foods, for which there is a fixed entitlement, the various charges amount to a net reduction of rather less than 1d. per head per week.

Mr. Piratin: In view of the fact that the Minister recently gave information with regard to five foodstuffs which have gone down in price, the amount of which he has just given as id. a week, and that, on the other hand, about 80 foodstuffs have gone up in the last few months, is it not important for the House to know whether it is the policy of the Government to create inflation and a rise in the cost of living?

Mr. Strachey: If the hon. Member wishes me to make this calculation he is really asking me to construct a new cost-of-living index, and that is not the business of my Department.

Profit Margins

Mr. Ronald Chamberlain: asked the Minister of Food, whether he will discontinue the practice of allocating profit margins to first-hand salesmen in future Orders regarding onions, tomatoes, pears, etc., with a view to abolishing this unnecessary link and reducing the burden of cost to the housewife.

Mr. Strachey: I cannot say in advance which profit margins will or will not be prescribed in future maximum prices Orders, since this must depend on the circumstances at the time. In the present shortage of onions, pears and tomatoes, first-hand salesmen are most necessary to ensure distribution to inland markets.

Mr. Chamberlain: Could the right hon. Gentleman say what functions, other than merely bookkeeping functions, these first-hand salesmen perform; and is he not aware that this system makes it possible for wholesaler-importers to secure three profit margins, that is to say, as importer, first-hand salesman and wholesaler?

Mr. Strachey: No, Sir. We are informed that we should not be able to cover the inland markets and get a uniform distribution over the country if we abolished this system.

Fish Supplies

Mr. Rees-Williams: asked the Minister of Food whether he is aware that there is a shortage of fish in Croydon, and that on certain days during the last fortnight no fish has arrived in the borough; and what steps he is taking, in view of his appeal and of the public desire for this commodity, to make a sufficient and constant supply of fish available.

Mr. Strachey: Landings of fish were poor until last week, mainly because of bad weather, and I fear that Croydon, in common with other parts of the country, has felt the effects. Supplies are now improving markedly and should stay at a high level during the summer.

Butter (Price)

Mr. Touche: asked the Minister of Food why the price of butter to the public has recently been reduced by 2d. per pound when his Department has recently agreed to purchase butter at a higher price; and what additional subsidy will these decisions involve.

Mr. Strachey: The reduction was made as part of the Government stabilisation policy. The additional subsidy arising from it and from the increase in the purchase price of butter from Denmark announced last February will be £4.9 million in 1947–48.

Mr. Touche: Is it not the intention of the Government to try to reduce the food subsidy, because this seems to be increasing it?

Mr. Strachey: No, Sir. If we can purchase butter, or anything else, more cheaply abroad we shall do so, of course, and that will help to reduce the subsidy.

Danish Blue-Vein Cheese

Mr. Touche: asked the Minister of Food what steps have been taken to obtain increased supplies of Danish vein cheese following the increased demand for it as a result of its reduction in points.

Mr. Strachey: We have just concluded a contract with Denmark for as much blue-vein cheese as they can spare until next December. The tonnage is a little more than we have been getting recently, and is about the same as prewar; but the main reason for the points reduction was to ensure rapid movement into consumption during the warm weather.

Imported Potatoes (Quality)

Mr. Sorensen: asked the Minister of Food if he is aware that quantities of Danish potatoes held by East London retailers are in poor condition; what redress purchasers or retailers can secure for potatoes of poor quality; and what action is taken to see that imported potatoes are up to sample.

Mr. Strachey: There have only been a few adverse reports on these potatoes. Allowances will be made if the potatoes are not up to standard, providing my Department is informed of the complaint before the bulk is broken; and the buyer has the normal rights of inspection and rejection before taking delivery. The potatoes are inspected on behalf of the Danish Government before shipment, and deliveries have complied with the requirement that they shall be of standard merchantable quality.

Mr. Sorensen: Has the Minister had complaints regarding Danish potatoes and the softness of their nature, because they are quite inedible?

Mr. Strachey: We have had a few, but not large complaints.

Mr. Sorensen: Could the Minister say what action has been taken regarding those complaints; and does not that indicate that this particular consignment must have been very bad?

Mr. Strachey: No, Sir. There is always a certain percentage of bad potatoes in any sample, and they have been within the normal limit of tolerance.

Catering Establishments (Supplies)

Mr. Hurd: asked the Minister of Food what quantities of each of the following foods go to restaurants and conteens for the year ending June, 1947; flour, meat, carcase weight, bacon ham, milk as milk solids, fats, fat content, potatoes and sugar.

Mr. Strachey: Figures cannot, naturally be given for the year which will end in June, and I am afraid that they could not be prepared in the form asked for, even for a past year, without a disproportionate effort. It is estimated that for rationed food supplies as a whole, about 10 per cent. go to catering establishments, including canteens and hotels. For some indication of the quantities of particular foodstuffs, I would refer the hon. Member to the answer I gave the hon. Member for Chichester (Mr. Joynson-Hicks) on 30th April.

Mr. Hurd: Surely, the Minister can give the House definite percentages in regard to each of these main foods, which is a very simple question?

Mr. Strachey: If the hon. Member will look at the answer I gave on 30th April, he will see that I gave actual tonnages. It is very easy to work out the percentages from that.

Sir Frank Sanderson: Could the Minister state whether the 10 per cent, he indicated includes supplies to canteens and factories?

Mr. Strachey: Yes, Sir, that is the major part of it.

Polish Eggs and Bacon

Professor Savory: asked the Minister of Food whether, before ratifying the commercial agreement with Poland, which provides for the import of quantities of eggs and bacon from Poland into this country, he will take into account the fact that Poland is at present threatened by a serious famine.

Mr. Strachey: As the hon. Member will appreciate, it is entirely for the Polish Government to decide how much food their country is able to export.

Professor Savory: Is not the right hon. Gentleman aware that, in view of the very

serious conditions prevailing in Warsaw and other cities, every egg and every ounce of bacon is required for the soldiers who have gone back from this country?

Mr. Strachey: The hon. Member must address these Questions to the Polish Government. I cannot judge of their situation.

Oral Answers to Questions — RESERVED SLEEPING CARS

Lieut.-Colonel Sir Thomas Moore: asked the Minister of Transport what is the reason for continuing the system of reserving sleeping-cars for Government-sponsored passengers in peace time.

The Minister of Transport (Mr. Barnes): The number of travellers requiring sleeping berths is considerably in excess of those available. Limited numbers are, therefore, reserved on certain routes for Ministers, Members of Parliament, businessmen and others who are travelling at short notice on important national business, and who are not free to travel by day.

Sir T. Moore: When is the ordinary citizen, not the very important person, who is engaged on his normal lawful activities to get back his ordinary rights. of which this is one?

Mr. Barnes: I have given figures to the House on previous occasions to indicate that only 6 per cent. of the third-class berths are now reserved, and 22 per cent. of the first-class berths are on certain routes. Of the first-class berths, 64 per cent. of the reservations are taken up by business and professional people

Oral Answers to Questions — SERVING OFFICERS (MEMBERS' CRITICISMS)

Commander Noble: asked the Prime Minister what rules govern public criticism by members of the Government of individual officers in His Majesty s Forces.

The Prime Minister (Mr. Attlee): There are, of course, no such rules.

Commander Noble: Would not the right hon. Gentleman agree that such attacks as were recently made by a Government Whip against the Naval Commander-in-Chief, Portsmouth—

Mr. Speaker: Matters of opinion are not subject to Questions in this House.

Commander Noble: Is not the right hon. Gentleman aware that an attack was recently made by a Government Whip against the Naval Commander-in-Chief, Portsmouth, and is he not of the opinion that such attacks are much to be deprecated?

The Prime Minister: It a Member of Parliament, or a Minister, chooses to. comment on a speech made in his constituency there arises the question whether that comment is justified or not.

Mr. George Ward: Would not the right hon. Gentleman agree that to attack a serving officer who cannot answer back is, to say the least, extraordinary?

Major Bruce: Is my right hon. Friend aware that the officer concerned has never seemed to be inhibited as to his public observations, and that my hon. Friend the Member for Central Portsmouth (Mr. Snow) has, in fact, shown considerable forbearance?

Mr. Eden: Would not the Prime Minister agree that there is a difference between statements made by Ministers, and statements made by ordinary Members of Parliament?

The Prime Minister: I agree that there is, but one must be careful about not restraining Members of Parliament from speaking in their own constituencies.

Commander Noble: The right hon. Gentleman has said that the hon. Member's speech was made in his constituency. I understand that it was not.

Oral Answers to Questions — FUEL MINISTER'S SPEECH

Sir W. Smithers: asked the Prime Minister if the speech of the Minister of Fuel and Power on 7th May, advocating that the interests of trades unions members should be the only concern of the Govern. ment, represents the policy of His Majesty's Government.

Viscount Hinchingbrooke: asked the Prime Minister whether the speech of the Minister of Fuel and Power to delegates of the Electrical Trades Union on 7th May, to the effect that the interests of sections of society other than the organised workers are of no concern to the Government,

represents the policy of His Majesty's Government.

The Prime Minister: My right hon. Friend did not make the statement attributed to him in these two Questions, and such a statement, of course, does not represent the policy of the Government. My right hon. Friend informs me that the words he used were, "We know that you, the organised workers of the country, are our friends and, indeed, it could not be otherwise; as for the rest, they do not matter 'a tinker's cuss.'" This phrase was used by him in dealing with attacks made on the Government by certain financial interests in the electrical industry, and was intended to draw a distinction between the attitude of these interests and that of the organised workers in the industry. My right hon. Friend desires me to say that, if there is any impression that it was his intention to ignore the views and interests of other sections of the community, he expresses his regret that any such impression should have been given.

Viscount Hinchingbrooke: Is the right hon. Gentleman aware that his interpretation of the speech cannot stand up against the Press Association's report, which was confirmed by that of the official reporter who was present, Mrs. Helen White? Do not all the conventions and precedents demand that the Minister of Fuel and Power should offer a personal apology for these repeated irresponsible utterances?

The Prime Minister: No, Sir. In a fairly long Parliamentary experience I have known of a great many statements made by Members on all sides, but I have never known an occasion of this kind to be the subject of a personal apology.

Mr. Yates: Would not my right hon. Friend agree that the economic recovery of this country will be utterly impossible without the support of organised workers? Has not the Minister of Fuel and Power, having obtained the co-operation of miners and organised workers, rendered a service to the nation?

Sir W. Smithers: Is the right hon. Gentleman aware that persons who make such undignified statements are not fit to govern and that he cannot make a silk purse out of a sow's ear?

Mr. Gallacher: Is it riot the case that the Minister of Fuel and Power was discussing those who would, and those who would not, support the nationalisation programme? Would it not be an excellent and acceptable parallel if the Chancellor of the Exchequer said that the mass of the people would support the National Savings campaign, and those who will not do not matter a tinker's curse?

Mr. Godfrey Nicholson: Will the Prime Minister tell me something which will interest me very much—what word a tinker uses that we do not know?

Oral Answers to Questions — AGRICULTURE

Harvest Labour, Romney Marsh

Brigadier Mackeson: asked the Minister of Agriculture how many soldiers and voluntary labourers were employed in Romney Marsh during the harvests in 1944, 1945 and 1946; and what steps he has taken to ensure that in this fertile and sparsely populated area there will be sufficient labour for the harvest this year.

The Minister of Agriculture (Mr. Thomas Williams): It is estimated that the numbers of troops and organised volunteers so employed in 1944 was nearly 1,000; in 1945, about 900; and, in 1946, about 250. This year supplementary labour will be available for the Marsh, if needed, from seven prisoner-of-war camps and hostels, two volunteer agricultural camps, two schoolboy camps and a committee hostel.

Woodlands (Census)

Mr. Vane: asked the Minister of Agriculture what plans he has for making a new census of British woodlands; when it is intended to start; and when he estimates it will be complete.

Mr. T. Williams: The Forestry Commissioners are already, engaged on a new census of British woodlands. The aim is to complete it by June, 1949.

Mr. Vane: Since the right hon. Gentleman has repeatedly represented that the Forestry Commission is very short staffed and overworked, can he assure us that it has sufficient skilled staff to carry out this extra work? Will he give an assurance that the Commission's officers will not

enter private woodlands, to obtain information without proper notice?

Mr. Williams: We are hopeful that our technical staff will be large enough for the job.

Mr. Vane: What about the second part of my supplementary question?

Poultry Feedingstuffs

Colonel Ropner: asked the Minister of Agriculture whether he will estimate the amount of feedingstuffs which may be made available for poultry in 1947 and 1948, expressed as a percentage of the amount made available in 1946.

Mr. T. Williams: Although I hope that supplies in the latter half of this year and in 1948 will enable me to increase the rations at present allowed for poultry, the position is as yet too uncertain for estimates to be formulated on the lines suggested.

Sugar Beet Pulp, Norfolk

Mr. Medlicott: asked the Minister of Agriculture if he is aware that farmers in Norfolk who were instructed to send their sugar beet to Felstead when the Cantley factory was closed during the fuel crisis have, as a result, lost the value of 1½ cwt. of pulp per 1 ton of beet; and what steps he is taking to make good to these farmers the pulp which they normally rely upon as feedingstuff.

Mr. T. Williams: Growers who failed to complete their deliveries of sugar beet to the Cantley factory before it was closed at the end of the campaign were given the opportunity, but not instructed, to send their remaining beet to Felstead. The supplementary contracts made for this beet do not entitle growers to any delivery of sugar beet pulp. Supplies of pulp are barely sufficient to provide the contracted quantity of pulp to growers who comply with their original contracts, and I regret, therefore, that there is nothing left for issue against supplementary contracts. Where need can be established such growers can apply to their county committees for an issue of feedingstuffs from county discretionary reserves.

Crawler Tractors

Mr. Medlicott: asked the Minister of Agriculture if he is aware that the number of crawler tractors allotted to the county


of Norfolk is inadequate to meet the needs of the county; that Norfolk farmers who already own crawler tractors are in difficulties through being unable to obtain replacements and spare parts; and if he will have the position investigated.

Mr. T. Williams: I appreciate the need for more crawler tractors in Norfolk, but the home output is still small and, owing to production difficulties in the U.S.A., we are at present able to obtain only comparatively small numbers from there. Very few complaints of difficulty in obtaining repair parts for crawler tractors have been received from Norfolk in recent months. If the hon. Member will supply me with particulars of any cases that have come to his notice, I shall be happy to have inquiries made.

Mr. Medlicott: Is the Minister satisfied that none of these tractors is at present being exported?

Mr. Williams: I am quite sure, within my own knowledge, that none is being exported from this country.

Flood Prevention, Severn Valley

Mr. Lipson: asked the Minister of Agriculture if, in view of the recent flooding in the valley of the Severn, he will take early action to meet the need for a comprehensive flood prevention scheme for the Severn Valley.

Mr. T. Williams: My Department has received a preliminary report from the River Severn Catchment Board on the recent floods in their area. This is being considered in preparation for early discussions with the Board on long-term works for flood prevention.

Mr. Lipson: Can the right hon. Gentleman say whether he has received any communication from the Cheltenham Rural District Council about this matter, and will he communicate with them?

Mr. Williams: I am not certain whether any communication has been received direct from them, but I will make sure that they know what steps are being taken.

Mr. Berry: Will my right hon. Friend consult the Minister of Fuel and Power so that the steps proposed to be taken may be combined with the Severn Barrage Scheme for the generation of electricity?

Mr. Williams: r think that will be inevitable.

Daccombe Valley (Use)

Brigadier Rayner: asked the Minister of Agriculture what steps he is taking to ensure the preservation of the Daccombe Valley for agricultural purposes; and what consultations have taken place with his Department about the proposal to use this valley as a housing site.

Mr. T. Williams: Although I understand that the Torquay Borough Council have notified occupiers of land in the Daccombe Valley that members of their staff will be surveying the area with a view to its use for housing purposes, no specific proposal has been submitted to my Department. If and when the proposal to build houses in the Daccombe Valley materialises, it will be referred to my Department through the Ministry of Town and Country Planning in accordance with the normal procedure in cases of this type, and the hon. Member can rest assured that every consideration will be given to the agricultural factors involved.

Brigadier Rayner: Is the Minister aware that Daccombe Valley is one of the most fertile of the smaller valleys of Devonshire, and, therefore, one of the most productive pieces of land in the Kingdom; and, while we agree that as we are situated today an increase of our food supplies is far more important than an increase in the amenities of Torquay, will he take a strong line?

Mr. Williams: I believe that it is true that this is very good agricultural land, but I cannot prophesy what will happen when all the factors are brought to our notice.

Saving of Foreign Exchange

Colonel Ropner: asked the Minister of Agriculture to what extent the figures given in the recent White Paper, Cmd. 7072, on the Post-War Contribution of British Agriculture to the Saving of Foreign Exchange, have been affected by the results of the past winter.

Mr. T. Williams: As the text of Cmd. 7072 makes clear, the figures there given are somewhat theoretical and have been made unrealistic by various developments since 1944. There Would, therefore, be


no point in adjusting them. It is clear, however, that the weather of last winter has caused an appreciable set-back in agricultural production, and in particular the losses of sheep and lambs will have a continuing effect for some years and will, therefore, diminish any expected saving of foreign exchange.

Oral Answers to Questions — HOUSE OF COMMONS CATERING (MENUS)

Mr. Vane: asked the hon. Member for Walthamstow, West (Mr. McEntee), as Chairman of the Kitchen Committee, what is the species of plover appearing on the dining room menu; and what is the country of origin.

Mrs. Ayrton Gould: I have been asked to reply. We are informed by our suppliers that the species of plover is the black plover, and the place of origin is Lincolnshire and the Fen District.

Mr. Vane: Does the hon. Lady think it very dignified for hon. Members of this House to debate the protection of rare birds one day, and then to find them on the dining room menu to eat the next day?

Mrs. Ayrton Gould: I confess that I do not know a great deal about this, but I understand that plover is a bird that has always been eaten, and that it is considered advisable in these days, when ordinary food is in short supply, that it should be used when possible in the House of Commons restaurant.

Mr. Skeffington-Lodge: Will the hon. Lady undertake to look up an Order issued by the Lincolnshire County Council, to ascertain whether or not plovers are protected in that county at the present time?

Mrs. Ayrton Gould: I will certainly do that.

Colonel Clarke: Does the hon. Lady appreciate that the name "black plover" is very indeterminate, and will she give us at some convenient time the scientific name for this bird?

Mrs. Ayrton Gould: I will have that in vestigated; I am afraid I do not know.

Mr. Benn Levy: asked the hon. Member for Walthamstow, West (Mr. McEntee), as Chairman of the Kitchen

Committee, if he will arrange for the dining room menus henceforward to be printed in English.

Mrs. Ayrton Gould: Yes, Sir. The hon. Member will appreciate that it is extremely difficult in some circumstances to find an English translation that will explain briefly that which is a term which explains a method of cooking or of presentation, such as hors d'oeuvre, etc.

Mr. Levy: I am not sure from the reply whether the menus will be printed in English in future or not. If they are not to be printed in English because of the reasons which she gave, then perhaps my hon. Friend would challenge one or two of us to try to devise an intelligible compendium of concise English equivalent to these culinary dishes?

Professor Savory: Is not the hon. Lady aware that for over 200 years it has been the custom to print these menus in the French language, as France is a country which is famous for its exquisite cuisine?

Mrs. Ayrton Gould: I agree with the hon. Gentleman. May I point out to the hon. Member who asked the Question, that hors d'oeuvre is described as "an appetising savoury of vegetables, fish, etc., served in small portions before the first course." Everyone knows what hors d'oeuvre means, but it would not be easy to print this shortly and concisely on the menu so as to give the same idea. I have not given an undertaking that the menus will be printed in English, but. I shall be delighted to have the suggestions of my hon. Friend.

Mr. Mikardo: Will the hon. Lady do what she can to ensure that the French is correct? Is she aware that on today's luncheon menu, no fewer than four accents are missing?

Mr. Henry Strauss: Is not "camouflage" of French origin anyhow?

Mr. Chetwynd: If the hon. Lady is short of words to describe most of these dishes in concise English, would not "sausage meat" do?

Major Tufton Beamish: is the hon. Lady aware that the hon. Gentleman who asked this Question used the French word menu?

Orders of the Day — FINANCE BILL

Order for Second Reading read.

3.31 p.m.

The Financial Secretary to the Treasury (Mr. Glenvil Hall): I beg to move, "That the Bill be now read a Second time."
The Second Reading of the Finance Bill is not normally an outstanding event in the Parliamentary Session. The ground covered has been well trodden already, not to say well churned up, by the guns, big and little, which have come into action on the dates of the Budget Statement itself, and of the Resolutions upon which, of course, it has been based. The Finance Bill harbours no mysteries, contains no new policy needing explanation, and its Clauses will be considered when the Committee stage is reached. Bearing all this in mind, I believe that the House will not wish me to refer in any detail to the provisions of the present Bill, or to take up time recapitulating the points which were made with such clarity and force by my right hon. Friend the Chancellor of the Exchequer when he made his Financial Statement on 15th April.
I gather from Press reports that the official Opposition intends to vote against the Second Reading of this Bill tonight. From various papers, including the "Financial Times" this morning, I understand that their objection to it is that it is unimaginative, pedestrian, a thing of bits and pieces, and, above all, that it budgets for too much, in that the expenditure, which of course does not appear in this Bill at all, is higher than it should be, and ought to be reduced. These and similar criticisms will no doubt be made from various parts of the House, particularly from the other side, during the discussion which we shall have this afternoon and evening. Of course, I make no complaint of that. That is what a Second Reading Debate is for—for the interchange of views and the voicing of criticism—but I think hon. Members on this side of the House will have legitimate cause for complaint, if the criticisms which are offered during the course of this Debate are purely destructive. If the Party opposite does not like some of the provisions, as I gather it does not,

we are entitled, and the nation is entitled, not only to know what those provisions are, but what alternative the Opposition would put in their place
Taxation is necessary to provide adequate revenue to meet national expenditure. It is also a formidable instrument for shaping policy. Through it, a wise Government corrects social inequalities, fosters trade and encourages fruitful, and checks bad, tendencies. I think it is generally agreed that at the present time the supreme need is for production, and that the supreme danger is inflation. The proposals embodied in this Bill recognise this need and this danger. They have been designed to provide, within the limits set by revenue requirements, both the maximum incentive to producers, workers and employers alike, and an additional safeguard against any tendency to inflation there may be in the present situation. As production increases, both for home and overseas markets, as goods become more plentiful in the shops, so the risk of inflation recedes. The two are closely inter-related. The Budget proposals of my right hon. Friend are, as "The Times" said the morning after he made his Financial Statement:
a plan of which resistance to inflation is the essence.
In his previous Budgets the Chancellor gave, in spite of substantial estimated deficits, substantial remissions to all sections of the community, and in the process he took, as is now very well known, over 2,500,000 workers out of the Income Tax paying class altogether. This was not only an act of justice to those who were in the lower ranges of income; it was designed to act, as I hope it did, and still does, as a great incentive to production. In this Budget, and embodied in this Finance Bill, are provisions which go a step further. My right hon. Friend has this time increased the earned income allowance, the allowance for children, and the dependent relative allowance, and also materially added to the amount left in the pockets of employed persons by these changes, particularly those earning up to £1,500 a year.
The increase in the Tobacco Duty undoubtedly captured the headlines in the Press, but in my view it was not the outstanding feature of this year's Financial Statement. The outstanding feature was,


I think, the decision by my right hon. Friend, embodied in the figures which he presented to the House, to budget for a surplus of £270 million. The decision has been universally accepted by informed opinion as sound. It adds another bulwark to those which now exist that is, price controls, rationing and the work of the National Savings Movement, against the inflationary flood. It is also, as my right hon. Friend has said, a cleat sign of our returning financial strength, which all the world should note. The deficit last year was just over £569 million, and the Bill duly provides, in Clause 58, for this on lines which have been a regular feature of each Finance Act for some years past. Next year, all being well, there should be no deficit to provide for, and this part of the Finance Bill should therefore disappear. For the same reason, this will be the first year since 1939 that Parliament is not being asked to pass a National Loans Act to authorise the Government to raise, by borrowings, the sums required to cover a deficit. In Committee of Ways and Means, some criticism was levelled at this surplus. I notice that in one financial paper this morning we are told that City circles point out that this surplus is a spurious one, and, therefore, I suppose, in some way unreal. I can assure the House that it is very real, and as the year proceeds, Members will realise it for themselves.
During our Debates on the Budget Resolutions, it was stated categorically by more than one hon. Member, and by some now sitting on the Front Opposition Bench, that this surplus was not a real one. I gathered, from what they said then, that the arguments in support of that contention were that, as it consisted mainly of unspent Votes of Credit and non-current items, it must be looked upon as not a surplus in the strict sense of the term. I fail to follow these arguments. There are non-recurrent or terminal items on the expenditure side, which, I can assure the House, are all too real. [Interruption.] There are I say non-recurrent or terminal items on the expenditure side of the 1947 account. There are these items, to which I have referred and which help to make up a surplus on the revenue side, and, if we exclude them from one side, as hon. Gentlemen opposite would have us do, we should, in common fairness, exclude the same type of item from the expenditure side. I would tell

the House that, if we did that, the net result would be to increase, not to lessen, the surplus which we have, and which is shown in the accounts published in the White Paper at the time the Budget was opened.
If hon. and right hon. Gentlemen turn to the White Paper then issued they will find, on page 13, Table VII (d), that the total cost in 1947–48 of terminal or temporary services arising out of the war is represented as something just over £320 million, £86 million more than the non-recurrent revenue items. In addition to this figure of non-recurrent costs, there should be added a further amount for the terminal charges of the Defence and Supply Departments. Hon. Members will find, in a footnote to the Table, that the terminal charges of the Defence and Supply Departments add £118,500,000, so that the 'effect of bringing non-recurrent items into account on both sides does mean not a reduction of the surplus, but actually an increase of over £200 million.
May I now say a few words about the methods to be applied to the disposal of the expected surplus? It will be applied to the reduction of debt as it accrues in the current year. Clause 59 of this Bill makes that possible. Paradoxically, the operation is carried out by suspending the provision for debt reduction in the Act of 1875—what is known as the "Old Sinking Fund" Act. If that Act operated, we should have to wait until 1948 before getting the benefit of the surplus, but, by this provision of Clause 59, the money can be set aside as it materialises, and this will reduce the volume of our borrowing and save interest charges. Some criticism has been leveled at the decision to finance certain items of 1947 expenditure by below-the-line borrowing, and there was an interjection earlier this afternoon pointing out that the Government does contemplate a certain amount of below-the-line borrowing. The items which have been placed below the line in this way are £330 million, which it is proposed to use for war damage payments this year; go Million which will go in E.P.T. refunds yet to be liquidated; and £70 million for postwar credits to old people.
The suggestion here again is that it is unreal to use one surplus to pay off debts, and, at the same time, to be increasing debts by borrowing below-the-line. We


are all agreed that the net result is ultimately the same, but, when the nature of the expenditure is considered, it does become obvious that it would be the right thing to do to treat at least two of the items I have mentioned, as capital, and not revenue, expenditure. Both war damage payments and E.P.T. refunds are non-recurrent, and both are substantially spent on capital assets. The postwar credits, too, are non-recurrent, and were paid last year by below-the-line borrowing. It is, therefore, reasonable, so far as postwar credits are concerned, I submit, not to change over from one form to another, but, as we did begin by paying them by borrowing, we should continue to do the same, and liquidate what has to be paid this year from the same source.
I would remind the House that my right hon. Friend, when he opened his Budget, dealt at some length with this point, and said that the main thing to remember is that no borrowing will be made merely to bridge the gap between income and expenditure. If we realise that that is his intention, it is obviously the proper thing, when we are paying out money which will be used and expended on capital assets, for that to be borrowed and not found in the normal way from the revenue. Actually, authority has already been given, and the House has already agreed to what we propose to do in this regard. Authority has been given to borrow for war damage payments under the Miscellaneous Financial Provisions Act, and, for the E.P.T. refunds, under the Finance (No. 2) Act, 1945. For postwar credits, which are provided for in Clause ii of this Bill, the similar provision in last year's Finance Act was Section 26.
Last year, my right hon. Friend faced an estimated deficit of £726 million. He faced it with a certain amount of equanimity, because the National Savings Movement had pledged itself to raise a very substantial sum towards filling the expected gap between income and expenditure. As the House knows, the National Savings Movement more than kept its word. This year, it is essential that the existence of the surplus to which I have referred should not deter any member of that Movement from carrying on the good work. The need for savings is as great as ever it was, particularly, savings

by what is called the small saver, and I am glad to see that this fundamental fact has been realised by that fine body of workers in the National Savings Movement, and that they have pledged the Movement as a whole to raise no less a sum than £366 million net; that is, £1 million a day for every day during the coning year. This will not only be a nest-egg to the wise people who put it by to be spent when goods are more plentiful and cheaper; it will also be of the utmost support in holding back inflation, and in providing finance for reconstruction, both by the Government and by local authorities.
In this connection, I call the attention of the House to the provisions of Clause 6I. Their effect is to assure to the small saver, who prefers to use the Savings Bank, that he will continue to receive 2½ per cent. on his deposits, even if the funds of the Savings Bank cannot be invested at this particular rate. This Clause puts the Savings Bank depositor on an equal footing with other investors in national savings, and gives him the complete security afforded by the Consolidated Fund. It was suggested by the right hon. and gallant Member for Gainsborough (Captain Crookshank), in an earlier Debate, that the inclusion of this provision in the Bill was a piece of "tacking." I think the right hon. and gallant Gentleman in making that observation, overlooked the integral part played by the Savings Banks in the National Savings Movement, and, therefore, in the financial provisions of the year which this Bill implements. The Savings Movement, as its name implies, is a national movement. As I have already indicated, and as my right hon. Friend has also indicated on more than one occasion, recent Budgets have taken its worth into full account, and the savings which it raised have been implemented in the financial structure of the coming year. Therefore, on those grounds, the Government have no hesitation in defending the propriety of having moved the procedure Resolution, by which the House expanded the scope of the Bill so as to include this provision.
In his Budget speech, my right hon. Friend indicated that his overall objective was to strengthen both the internal and the external position. So far as the internal position is concerned, as, no doubt, the House will already have gathered,


approximately the same revenue is being raised though its incidence has been slightly changed. Reliefs, mainly to individuals, through the allowances which I have already indicated—the earned income allowance, the child allowance, and the dependent relatives allowance—have been offset by the Profits Tax, the duty on bonus shares, the increases in the Legacy and Succession Duties, and the Stamp Duties, all of which are dealt with in this Bill.
As to the external position, apart from the overall design to assist industry underlying the Budget as a whole, the major change has been the 50 per cent. increase in the Tobacco Duty provided for under Clause 3. No doubt a good deal will be said this afternoon, and certainly during the Committee stage, about the incidence of the Tobacco Duty. When my right hon. Friend winds up the Debate this evening, he will deal with any points raised in the course of this afternoon's discussion. It has been said that this increase is an infallible sign that the present Government do not intend to make an appeal to the country during the present year. It may well be that the prophets are correct in their forecast, and that no Election will take place before another Finance Bill is presented to the House, but they are certainly wrong if they imagine that my right hon. Friend the Chancellor would have hesitated to increase the duty on tobacco had there been any likelihood that an Election would take place during the coming year.
I remember the Debate that took place on the Finance Bill during the tenure of office of the last Labour Government in 1929–3I. On one occasion, the right hon. Member for Woodford (Mr. Churchill), in winding up the Debate on Second Reading, accused the Chancellor of the Exchequer of that time—Mr. Snowden as he then was, afterwards Viscount Snowden—of introducing a Budget of pains and penalties, deliberately and obviously aimed at taxing only those from whom he was quite sure he could never receive a vote. No such gibes can be levelled at my right hon. Friend on this occasion. The increase in the Tobacco Duty hits Labour supporters just as hard as—some people might think even harder than—it hits the supporters of the party opposite. This increase, though extremely painful to the consumer, is, as my right hon. Friend

has emphasised, absolutely necessary. It has been imposed because of the paramount necessity to save dollars, and not for the purpose of raising revenue. In fact, no one would be happier than my right hon. Friend if, when he comes to make his Budget statement next year to the Committee of Ways and Means, he has to tell that Committee that there has been a considerable drop in the revenue received from tobacco. He would not only like to feel, and eventually to see, that people are smoking less, but that they are smoking considerably less, so that the amount received during the coming year, in spite of the extra duty, is even less than it has been during the year 1946-47.

Mr. Beverley Baxter: If the Chancellor of the Exchequer is as sincere in his desire as the right hon. Gentleman the Financial Secretary states, in cutting down the importation of tobacco, does he intend to do anything about the mass evasions of the increased price by the co-operative societies, who are selling to anybody who joins them, at 4d. per packet under the Chancellor's restricted price? Does the Chancellor mean business or not?

Mr. Glenvil Hall: I think, perhaps, that it would be unwise of me to enter into the point raised by the hon. Gentleman [HON. MEMBERS: "Why?"] I think it is a point which could be more usefully raised when we come to deal with this matter in Committee. If the hon. Gentleman really feels that mass evasion is taking place, it is undoubtedly his duty to report the matter to the proper authorities, so that it can be gone into to see whether there is or is not anything in the allegations he makes.

Mr. Baxter: I have just done that.

Mr. Nigel Birch: Most publicly.

Mr. Glenvil Hall: It is one thing to make an allegation and another to prove it.

Mr. Lipson: Before the right hon. Gentleman leaves the question of the Tobacco Duty, may I ask whether he is is a position to make a statement about a concession to old-age pensioners?

Mr. Glenvil Hall: I was not going to deal with that matter now. It has been arranged that when my right hon. Friend the Chancellor winds up this Debate, he


will make a statement to the House, which will include the point now raised by the hon. Member for Cheltenham (Mr. Lipson).
The mysteries of international trade and currency exchanges, which were previously a closed book to so many, are now, I think, becoming fairly generally understood. Our present, and, I hope, temporary, difficulties are beginning to demonstrate to the men and women in the street the fundamental fact that this country cannot import unless it exports, that they must create if they want to enjoy. There is a passage in Pepys's Diary which is not inapt, I think, in this connection. Says Pepys:
He (Sir Philip Warwick, Secretary to the Treasury) showed me how many ways the Lord Treasurer did take before he moved the King to farm the Customs in the manner he do, and the reasons that moved him to do it. He showed me a very excellent argument to prove that our importing less than we export do not improverish the Kingdom, according to the received opinion which; which though it be a paradox, and though I do not remember the argument, yet methought there was a great deal in what he said.
The people of this country, I think, have a great sense of political reality, born of long experience of the democratic way of life, and once it becomes clear to them that a certain course of action is essential in the public interest, they will accept it. It is my belief that after the first shock, they have accepted the increase in the Tobacco Duty as right and proper. They now realise that the choice is between tobacco and food and other essentials, and they are quite willing that tobacco should take a second place. Like Pepys, although they may not remember the Chancellor's argument, they are convinced there is a great deal in what he says. I believe also that, overwhelmingly, the people accept the other provisions in this Bill, realising the difficulties under which the country is now labouring, and that they accept those provisions as reasonable, in spite of the very heavy taxation which now falls upon them. That being so, I have every confidence that, as the year continues, the provisions in this Bill will have their effect along the lines which, I am quite sure, are desired by all sections of the House. We want a Finance Bill that will assist production and not hinder it, which will give to the great body of producers as much incentive as it is possible to give them. It is my belief that the burdens in this

Finance Bill are not only acceptable to the people as a whole, but are looked upon by them as right and proper in the circumstances in which we find ourselves. I commend the Bill to the House.

4.4 p.m.

Captain Crookshank: As always, we have been delighted to listen to the right hon. Gentleman the Financial Secretary give his description of various parts of the Bill. I cannot quite agree with him when he says there are no mysteries in it. Certainly, Clauses 14 to 18 open up a subject to which very little reference has been made in the previous discussions. That is the subject of retirement benefits. When it comes to real mysteries, I think if any hon. Member can say that he understands every word of Clauses 28 to 31 with regard to the Profits Tax, then the days of Maskelyne and Devant are quite finished. There is one other point I want to take up at once with the right hon. Gentleman concerning the Clause which deals with the Savings Bank and puts the Consolidated Fund behind its accounts. The right hon. Gentleman commented on something that I had said, I think at Question time, to the effect that that Clause was a very bad case of "tacking." The right hon. Gentleman said that the Chancellor and he had no hesitation in moving the Procedure Resolution in order that this might be put into the Bill. I dare say they had no hesitation at the time, but that entirely proves that it was a "tacking" Clause. That is exactly the point that I was making. If it had not been necessary to pass this special Resolution, the question would not have arisen at all. I am afraid the right hon. Gentleman has not really persuaded me upon that point.
The Finance Bill, of course, is the legislative form of the tax proposals of the Budget, and we shall naturally consider the details later on. I think in a Second Reading Debate our job is to consider the spirit that is behind these proposals, to try to weigh up the sins of omission and commission of the Chancellor of the Exchequer—and there are many of both kinds—the relevance of his policy to the facts of today—incidentally, the facts of today are not necessarily the facts of a month ago—and the whole bearing of the financial ideas, of which the Finance Bill is some exposition, upon the economic situation. It may be that the Chancellor


has already explained all these things, but if he has, I can remember neither the argument nor the occasion. To misquote the Financial Secretary's quotation a short time ago, "Methinks, anyhow, it must have been very bad." This Bill covers very vast expenditure. I am not going into all the details. I only want to bring vividly before hon. Members one fact. Needless to say, the Government have not mentioned it. That is, that the Chancellor estimates the total tax revenue to be received this year as £80 million more than the estimate that he made last year for total tax revenue. That is very staggering.
In putting his proposals before us, the Chancellor has been guilty of, perhaps, three great offences. What he really does is to ride with great gusto up to the fences; then he abandons any idea of jumping them He does a lot of gesticulating instead. The first fence from which he ran away was this—and I hope this will be an occasion when he will try to jump over it; if he does not, perhaps he would tell us when that occasion will be. We have never had any kind of reasoned statement from the Chancellor of what, in his view, his contribution is to the general economic policy of the country as it was debated in the three days' Debate on the economic situation, in this House and in another place. The Chancellor took no part in that Debate, the general idea being that he could not anticipate his Budget Statement. But the Budget Statement was made, and he never told us anything on that occasion about how he was going to use the financial weapon to help in our very serious economic situation. He talked a lot about cheap money in his Budget speech. He made a lot of obiter dicta on this subject, but did not give us a connected account of how his mind was moving—if, indeed, it does move. We shall be very grateful if this is the right occasion for him to do so. If not, could he hold out any hopes later on? It was not much good providing us with the various White Papers such as the Economic Survey, the White Paper on National Income and Expenditure, and all the rest of it, unless he gives us some idea of his views. That was the first fence that the Chancellor refused to jump.
The second fence that he refused to jump is this. This is relevant to discussion on the Finance Bill, because that Bill is the authority for raising the necessary

money to meet our expenditure. He admitted that the present system of subsidy on food is too high, in these words:
… we shall have to devise, in due course, a modified policy, which will no longer aim at an absolute stability, and will, I hope, cost the taxpayer less money."—[OFFICIAL REPORT. 15th April, 1947; Vol. 436, c. 46.]
He admits that he will have to devise something which will cost the taxpayers less, but he has not done so. Nothing has happened.
The third fence is that he admits that expenditure is too high. In his winding-up speech, he said:
There is much scope for reduction in defence expenditure yet, much scope for reduction in overseas expenditure of various kinds, and for a reduction in some selected parts of our domestic expenditure. I think that there are too many civil servants."—[OFFICIAL REPORT 17th April, 1947; Vol. 436, c. 461.]
But, having told us what he thinks, nothing is happening. So little is happening that a reply to a Question was recently given in this House to the effect that there was not going to be any overall cut in the Civil Service, for reasons which seemed to the Government good.
Those are the offences with which I charge the right hon. Gentleman. He has not given us a full view of the financial panorama as he sees it. He has not dealt with the expenditure on food subsidies, though he admits it is too high and must be pulled down. He has not dealt with the economies which he admits are necessary. Those are the things he will have to explain.
The evil that men do lives after them; The good "—
such as there is in this matter—
is oft interrèd with their bones.
The eyil will, no doubt, live after the Chancellor of the Exchequer unless he mends his ways.
It is agreed nowadays that the Budget can be used as a most potent instrument for guiding and helping the economic situation. The old theory that the Budget was just a matter of balancing accounts has gone out of fashion, at any rate, temporarily, and the Chancellor has often said that he agrees with the modern theory. He agrees with it, but I do not see that he is yet acting upon it. In fact, he is off with the old love, but he has not gone on with the new one yet. He is in suspended animation between the two [Interruption.] I am sorry if


the hon. Lady the Member for Epping (Mrs. Manning) takes that amiss. If the Budget is to be this important economic weapon, it is obvious that it can have a very great scope and can work with very quick results. It is unnecessary for me to go on about the problem. The Government themselves have stated it in the simplest words. It was the Chancellor, or the President of the Board of Trade, who said that the problem was one of too much money chasing too few goods. That gap has got to be reduced somehow.
It can be reduced either by checking money production, the money in circulation, and, or from below, by raising the production of goods. The Finance Bill can help in that connection to influence production, either by the effect of the Chancellor's decisions on the total amount of money circulating, which, of course, he is able to consider very carefully all the time, or by the distribution of tax reliefs, or by imposing new taxes on various classes of taxpayers or on various commodities, goods and services. The Chancellor does not seem to have gone far enough in either direction to meet the needs of today. When dealing with the monetary situation, his purpose must be to reduce the gap between the supply of goods and purchasing power, and when dealing with taxes his purpose should be to increase the incentives to production. Does he do those things in the Finance Bill? I cannot see that he does them to anything like the extent necessary. It is agreed that there is a danger today of too much money and too few goods. It is agreed that if the persistent gap between Government expenditure and Government revenue covered by borrowing continues, it will be of an inflationary character. It is agreed by the Government that we must try to stop it. It does not matter what words the Government use—whether "deflationary," "anti-inflationary," "counter-inflationary" or "disinflationary"—the idea is to close the gap somehow. That is accepted by everybody.
Does the Bill do that? Here we come up against the problem which the Financial Secretary described on the first issue about the amount of money in circulation. The Financial Secretary claimed that there was this surplus, and therefore, on the face of it, as that face was exposed by the Chancellor and the

Financial Secretary, there is a substantial surplus, which was all to the good, towards closing the gap. That is exactly where we quarrel with the Chancellor. We do not admit there is this wonderful surplus of £270 million. The Financial Secretary said it was very sound to have a surplus. It is sound enough to have a surplus; the point is whether there is one. If there was this surplus, the Financial Secretary said, it would be a bulwark against the flood, and the fact that there was a surplus would be shown as the year proceeded. I find that hard to understand. Either there is a surplus, or there is not. What the weeks and months as the year proceeds have to do with it, I do not know. It still remains our view that the Chancellor has juggled about with terminal receipts and terminal expenditure, to use the jargon of the day, and with what he puts above and below the line. The thing to remember is that what is put above and what is put below the line—in other words, what the Chancellor decides shall be paid for entirely out of revenue and what he decides shall be helped along by borrowing to cover the expenditure—is a matter for his own choice. He settles it. Therefore, the Chancellor is the one who can say at any given moment whether there will or will not be, whether there shall or shall not be, a surplus, because it depends upon what he borrows and what he finances out of taxation.
There is one other great source which I do not think has received much attention so far, but which should be noted, and it is that, with the Government now engaging in so much trade—for example, in food—the Chancellor can, by instructing the Minister of Food to draw rather more upon his stocks, create quite a different financial picture, although it may not be sound national economy to run down the stocks in one or other commodity. It lies very much within the Chancellor's hands as to whether or not there is to be a theoretical surplus. However, on the figures as presented to us hitherto, in spite of the arguments which the Financial Secretary has made, we still hold the view that the surplus as disclosed, explained and expounded by the Chancellor is largely fictitious, or bogus.
The Chancellor said that Government borrowing this year will be only for the creation of capital assets. That, broadly speaking, is the sort of line he will take.


Of course, that sounds all right if one is satisfied the Government will not try to create more capital assets than can be properly provided by the savings likely to be available, because if they do they will end by being in a worse position than that in which they started. From the experience we have had so far, we are not certain about that. It looks all the time as if the Government were trying, on the side of capital assets and their creation, to get more out of the nation, or the national kitty, than is there. The most obvious example of their continually estimating too high what they hope to do is to be found in housing, where the Minister of Health has had all the time to lower his targets or estimates, or whatever he calls them, for he does not like those two words; certainly, the figures which the Minister of Health has allowed to be spread abroad of what might happen have been falsified very often, and very few houses have been built. It may be the Government will go on trying to get too much, and if they do we shall be in great difficulty.
Therefore, unless previous experience is overturned, the Chancellor is likely to go a bit astray there. He is likely also, in spite of the declaration that he wants only to borrow for the creation of capital assets, to have to borrow owing to the difficulties of supply, the uncertainties of the time, and the after effects of the fuel crisis, which are still continuing. That is another danger. Of course, if he goes on bolstering too quickly his cheap money policy, with which we fundamentally agree—it is only because of the pace that he has, in our view, gone astray—he may, there again, make the situation worse. On those points therefore, I conclude that the Chancellor has failed to make full use of the Finance Bill and the possibilities which it could have enshrined to deal adequately at this stage with the economic situation in its monetary aspect. The first point that I want to put to the House is the failure of the Bill to deal with that problem.
What do we find on the other side of the picture—the problem of trying to bridge the gap which the Chancellor and everybody else talks about of there being too much money and too few goods? The necessity, of course, is to boost production. Is that being done, on anything like the scale on which it might be done, in the Finance Bill? My answer is

"No." First, the taxes which the Finance Bill covers are still much too high. They are too high because expenditure is much too high. I am certain there is a psychological figure above which it is impossible in a free democratic country to squeeze taxation from the willing taxpayer. Here we have £3,181 million of national expenditure, excluding the Post Office.
There is, in parenthesis, one point which I should be exceedingly grateful if the Chancellor could explain at some time. It arises partly because he has not given us his views on the Economic White Paper, but I should be glad if he would make a note of the question and give us an answer some time. On page 31 of the Economic White Paper, there is described the distribution of the national resources in 1947, and it is stated that 24 per cent. of national expenditure will go to defence and other public expenditure. I know there is a slight difference between the financial year and the calendar year, but it does not make the sort of difference that I want to ask about; I find it very hard to understand how one begins to equate 24 per cent. of national expenditure mentioned in the White Paper as going to defence and other public expenditure when, in the ordinary Financial Statement, the amount of estimated expenditure is £3,181 million. The general sort of figure of national expenditure which is given in these various documents is £8,500 million. Leaving out the odd figures, £3,000 million is not 24½ per cent. of £8,500 million. It is a great deal more than that. I should like some reconciliation to be made. It may be all right, but I do not know, and I put it to the Chancellor that, on these frightfully difficult and complicated subjects, the Government are very helpful in providing White Papers, surveying income and economic matters, but if in some they deal in terms of pounds and in other in terms of percentages, and the two do not at once leap to the eye as being reconcilable, they merely tend to make confusion worse confounded.
I now come back to the theme on which I want to say a few words—the incentives for boosting production. First, taxes are too high, and they are too high because expenditure is too high. The Chancellor accepts the fact that expenditure is too high because, as I have shown


by two quotations about food subsidies and other forms of expenditure, the Chancellor admits that they should come down, although he has not done anything about it. One can either increase production and produce incentives for that purpose, or one can reduce consumption of the things which nationally one cannot afford. With regard to the encouragement of production through the machinery of taxation, we welcome what the Chancellor has done by means of the earned income allowance and so on; but we do not think he has gone far enough. There is scope for going much further, and in Committee we shall argue on those lines on some Amendments which we hope will be in Order. In so far as the Chancellor has given incentives in that direction, it seems to me that by his tax on undistributed profits he has undone a good deal of the usefulness of the idea at the back of his mind, because, as he himself has admitted in the past, that is a very foolish tax. It falls upon risk bearing and enterprise. It may be that it appeals to the Chancellor's political friends and is merely a political tax, but when one is trying to find incentives for production, it seems to me there is hardly anything that could have been more foolish. It may be that the Chancellor is merely playing at politics. It may be he fancies his chances of becoming outside-left in the Government team, but I always thought his object was to be centre-forward and captain. He had better be careful before he goes out to the wings. I put it to the Chancellor that, from the point of view of incentives to production, while I am sorry he has not gone as far as he might have done in the first case, perhaps he will be able to do something with regard to the second, the Profits Tax. The best thing would be to drop it. There will be plenty of time to discuss that later on.
On reducing consumption, the right hon. Gentleman told us that he is going to increase the duties on gas and electrical appliances. Of course, that is a matter of closing the door long after the animal has escaped. I wonder whether the Chancellor will be able to hold to that increase when it comes to cooking, because anybody who has looked at many of the prefabricated houses wonders how they will be able to get along if fresh difficulties are to be put in the way of people in regard to gas and electrical

appliances. I would not be surprised if the Chancellor had to give way on this matter before we have finished with this Bill.
I listened to what the Financial Secretary said on the subject of tobacco. I hope the right hon. Gentleman will look into what was said by my hon. Friend the Member for Wood Green (Mr. Baxter) in regard to the co-ops, and the price at which they sell cigarettes. I note that the Chancellor is to make a statement on the matter at the end of the Debate. We want to give all the help we can to the reduction or alleviation of the tax in the cases where it has been most hardly felt. I am sorry for the Financial Secretary, having been a Financial Secretary myself for so long. He has not been allowed to say anything. Quite obviously it has all been settled. A month has gone by since the Budget, and all these talks have gone on since. It is obvious that nothing is going to be changed by what anybody says in the next five or six hours—at any rate I do not believe it will be so—and it would be quite contrary to precedent if it were so. It is also quite in accord with precedent for a Financial Secretary not to be allowed to say anything.
I am trying to deal with the point of how far the Chancellor's Budget is encouraging production by stimulating the incentive to produce the things that we cannot now afford. The taxation on electrical and gas appliances is a bit late in the day and the Chancellor will not be able to hold that position. On tobacco, it is likely—I put it no higher—that there will be some changes before we have finished. As it stands, the increased Duty is unfair in its incidence and speculative as to its results. Even if he got 25 per cent. saving in consumption it would save him only a very small percentage of dollars over the whole year. From the point of view of reducing the consumption of something that we cannot afford, the tax is not likely to be very successful. I will not expatiate more on this point, because I have already spoken on it.
There is another point on which I hope the Chancellor will say something. I do not think it has been adumbrated by the Financial Secretary. Will he tell us what other cuts he proposes to make in the consumption which he says we cannot


afford? A month ago he said he was studying further cuts. I saw a report in a newspaper this morning of a speech made by him during the week-end, in which he returned to the theme that there were to be further cuts in dollar imports. I hope he will tell us something more today. I find that on the second possibility of helping our economic difficulties by increasing production and reducing consumption of what we cannot afford, the Chancellor has not been successful. We think that he has failed on the monetary side, and on the side of taxation, whether as incentive or as deterrent.
The Chancellor says he is worried about the external situation and that the internal situation is better than he had hoped. We do not share his complacency in that respect—not by a long way. He seems to think that physical controls are enough to deal with inflationary pressure. There, again, let him remember the vast and complicated controls which we have, some of which may be necessary—I am not arguing about that at the moment—and that, by the very fact that they are there, they check industrial enterprise and commercial development To the extent that they are effective on one side of the picture, they are a deterrent when we are trying to get incentives to further production. It is only the right hon. Gentleman who can balance up the two. We sitting on this side of the House cannot do so, but somehow we do not feel—it may be intuition—that he has got the balance quite right.
I say that the Bill fails, and that we cannot support it. It fails as a monetary and economic weapon. It aims to collect far too much in taxation. Some of the new taxes, like those on tobacco and profits, are very bad. Furthermore, its pretended accounting is absurd. Its alleged surplus is, in our view, fraudulent. Having summed up my case against the Bill, I think in quite appropriate and polite language—[Laughter.] Well, I have not stood here gesticulating like a windbag. I have merely shortly stated our views—and having done so, I shall advise my hon. and right hon. Friends to vote against the Bill, as we voted against last year's Finance Bill. On that occasion, the Chancellor made great play with the Opposition. He set out all the things which he said we were voting against. Taxes cover many expenditures. He picked out all the things

which he thought might make a nasty smear upon our perfectly pure political record. No one is better than the Chancellor and his friends at smearing other. people's records. Of course, he knew, as did other hon. Members, that it was an absolutely false argument, as it will be this year if he repeats it. [Laughter.] Of course it is. Everybody knows that, in the whole vast field of governmental expenditure, there are great blocks, particularly in the social services, which we inaugurated and developed, and will continue to develop and watch with the utmost concern and sympathy all the time. The Chancellor know that: so does everybody else.
In the Bill, whether we use the word "bill" in the legislative sense, or in the sense of an account being presented, much is bad. It is from the bad things in the Bill that we wish to dissociate ourselves. In fine, it goes no way towards solving the very serious position in which we find ourselves. The Government have always admitted the seriousness of that position. Their own posters now urge the people to work, or else want We say that, in our view, for the sort of crisis which is upon us, the Bill is inadequate. It is as a protest that we shall vote against the Bill. The Bill marks the failure of the Chancellor of the Exchequer to do his duty by the nation, hard and unpleasant as that duty would have been Oddly enough, the right hon. Gentleman is normally a brave man, but in this case he has lacked the necessary courage. As that is so, we reprove him. We condemn him. We repudiate him and the views of all who sit with him. We will do so in the only way we can, in the Division Lobby. Of course, the right hon. Gentleman will carry his Bill, but as the months and years go by, people will realise that it is we on this side of the House who are right today. It is he and his friends who will be proved wrong.

4.39 P.m.

Mr. Diamond: I have been waiting for the Opposition to tell the House what it is particularly they are opposing in the Bill. They are against the Profits Tax. It is somewhat difficult for me to follow the argument of the right hon. and gallant Gentleman, that the Chancellor of the Exchequer failed in his Finance Bill to make clear his intervention in the economic Debate,


when my right hon. Friend said that he would make a statement in the course of his Budget speech and gave the reason why he did not wish to anticipate that. The right hon. and gallant Gentleman has just pointed out that the essence of the Economic Survey was, first, that we should produce more and, secondly, that we were short of dollars. What is the Finance Bill doing to remedy that position? In my view the proper title of this Finance Bill should be "The Producers' Finance Bill." It encourages production among all parties who are concerned in that important process. It encourages production among the workers, who are the most important factor, by increasing the various allowances in such a way as to relieve many of them completely from the burden of taxation and to reduce that burden for the others. It encourages production among the managers. The Bill in fact goes a long way towards increasing production—as much as any Finance Bill can do. It increases the earned income relief, as we asked a year ago should be done. More than that, it raises the limit from £1,200 to £1,500, a point which was strongly pressed a year ago from this side of the House. We appreciate that there are many people in management who are round about that income level, and this reduction in taxation will help them.
The Bill also encourages the owner. Some 18 months ago, when I felt even more nervous than I am at the moment, and was making my maiden speech, I appealed to the Chancellor to remove the Excess Profits Tax. No one would then have thought that 18 months later, we should be discussing a Finance Bill in which the Excess Profits Tax was stone dead. No business owner would have been optimistic enough to believe that in so short a space of time after the war, that tax would be completely disposed of, and no attempt made to introduce anything to take its place.
From the other side we have not heard one word about the tremendous relief felt by the business community on hearing the Budget and this Finance Bill when it was seen that no substitute for the Excess Profits Tax was provided, because a substitute was not necessary as a result of the excellent way in which my right hon. Friend has managed the country's finances. What has taken its place? A

mere 5 per cent. Profits Tax. It is against this Profits Tax that the Opposition are proposing to vote. I would say to my right hon. Friend that it is a most excellent tax. It does not impede production. It is not a deterrent—far from it. If a manager of a business looks upon his proper function as the making of as much profit as he can, he wants to have removed from him any fear of the Excess Profits Tax which takes away a wide sweep of his income completely. Here is a mere 5 per cent., a mere Is. in the £. It merely restores, as it were, the 10s. in the £ income tax.

Mr. Spearman: May I suggest to the hon. Member that he is premature in suggesting that we on this side of the House oppose the Bill only because of the Profits Tax? Whatever else we may think of it, I assure the hon. Member that there are far more important objections than that to the Bill.

Mr. Diamond: If so, they were not made clear in the speech of the right hon. and gallant Gentleman. He certainly referred to a variety of matters which he did not oppose. He criticised my right hon. Friend for not having made clear in the economic Debate the point about incentives to production. It seems to me from what has been said—and also from one's natural understanding—that the Profits Tax is the essential point to which hon. Gentlemen opposite are opposed. I would say that the Profits Tax is something which everybody who has the job of dealing with taxation well understands. I could not go quite so far as to say that it is a streamlined tax. My right hon. Friend likes that phrase but certain Clauses of the present Finance Bill hardly warrant such a description. Nevertheless, this tax is certainly one which everybody understands.
In particular I would congratulate the Chancellor on bringing in for the first time the principle of differential taxation. That is something which has appealed to many of us for a long time, but it has been found impossible to introduce it so far as ordinary Income Tax was concerned. There were many difficulties and it was impossible to arrive at a fair basis. However, with this comparatively simple series of Clauses—which the right hon. and gallant Gentleman said he was unable to understand—we have a system


whereby the essential principle of ploughing back profits is to receive a financial reward. I believe that that is an excellent thing, and I hope that my right hon. Friend will not regard 12½ per cent. as the upper limit to the Profits Tax. It. seems to me that there is plenty of room for expansion should the circumstances warrant. Of course, they do not perhaps warrant it today since we have a surplus, and we have that surplus in spite of allegations by hon. Members opposite that we have achieved it by curious accounting.
As an accountant I would say that it is not possible to define precisely the basis on which the nation's accounts should be framed. One can, however, say that these accounts follow the traditional basis, and they are, consequently, comparative, one year with another. It is perfectly consistent for that to be done just as, whenever a surplus is made by the Government, it is consistent for the Opposition to challenge the methods by which that surplus has been demonstrated. There is, perhaps, one small point in connection with this Profits Tax which I might draw to the attention of the House, if only to show that I have read the Bill. Under Clause 39 (2) one finds a curious piece of draftsmanship. It says that the Profits Tax shall be computed, first, on the basis that certain provisions do not have effect and, secondly, on the basis that the said provisions do have effect. This is one of those rather unhappy phrases which seem to indicate that "you pays your money and you takes your choice." Or perhaps I am being a little too optimistic and it just means "You pays your money."
There are one or two further points in the Finance Bill on which I should like to congratulate my right hon. Friend. The provisions concerning the retirement of directors are obviously right and proper. As those who deal with this kind of thing know, this was one of those very few and fast disappearing occasions when the Inland Revenue lost both ways. They lost the tax in respect of the company paying the retirement grant and as regards the recipient they also lost in certain cases. It is a good thing, therefore, to see that that has now been put right. It is also a good thing to see that the principle of P.A.Y.E. has been extended under these Clauses on a "Pay-as-you-retire" basis. While I am on this

question of "Pay-as-you-earn," may I once more reiterate my firm belief that it is a most excellent system of collecting taxation? It is by no means a deterrent and helps the workman and all employees to understand where they are. In particular, we must not forget that this year P.A.Y.E. carried with it what I might call R.A.Y.D.E. — "Receive-as-you-don't-earn." During the transport crisis I should say that one of the elements which was most helpful in keeping the country balanced, was the fact that vast numbers of men received back quite useful and substantial sums under P.A.Y.E. It is not an ill thing that that should be mentioned on this occasion.
Wherever one looks in this Finance Bill one finds, with one minor exception, matters upon which one can congratulate the Government. But just as when one turns any brightly scintillating diamond one notices particularly a facet which is slightly dull by comparison with the others, so I have noticed one point in the Bill upon which I would ask the right hon. Gentleman for some further explanation. I refer to the tax on bonus issues. It seems to me that a little clarification as regards bonus issues would not be out of place. One of the main reasons for supporting the Profits Tax as to its differential principle, is that it results in encouraging what we all want to encourage—the ploughing back of profits into a business. If I were asked to define a bonus issue in very few words I should say that it is ploughing back the profits of a business so deeply that they can never be distributed again. The hon. Member for Bath (Mr. Pitman) reminds me of an example. If a company desiring a loan goes to a banker, and he looks at the balance sheet and sees a comparatively small capital but a large undistributed sum of profit, he will say, "The first thing I want you to do is to transfer that profit to capital so that I know that the loan will be secured and that the company will not distribute this accumulated profit at any time." [HON. MEMBERS: "Hear, hear."] I am grateful to hon. Members opposite.

Viscount Hinchingbrooke: It is merely that it is such a relief to us to hear an hon. Member opposite say something that is right for once.

Mr. Diamond: This is very embarassing, but I will deal with the noble Lord's point later. I would say that the picture


I have given represents the experience of hon. Members. Of course there is more than one way of doing it. A bonus issue is only one way—and by far the least frequent—of putting the situation right. However, it is one such method and, to that extent, it is a good thing. The difficulty is that if I were asked to describe in a few words what a bonus issue was not, I should have to turn to the Budget Statement and quote my right hon. Friend's statement that a bonus issue is nothing more than a watering of capital. I have not come across such' a case and that is why I am making my right hon. Friend to be a little more explicit as to the justification for that statement. He went on to say that it was also:
a method of concealing profits, and so misleading customers, employees, and the general public, and heading off demands for lower prices or better conditions of employment."—[OFFICIAL REPORT, 15th April 1947; Vol. 436, c. 82.]
I should have thought that we had advanced a long way beyond that. The right hon. Gentleman and the various Departments of the Government have at their service, accountants well trained in ascertaining the real profits made by various companies. Throughout the war they have done that, so far as Government contractors are concerned. Not one of them has had regard to a pure rate of dividend on issued capital. The relevant factor is the profit made with regard to the capital employed, a term that is well understood in those circumstances. The capital employed has very little to do indeed with the issued capital. It is, therefore, not correct to say that a smaller rate of dividend arising through a series of bonus issues over a number of years, does anything more than befuddle those who know very little indeed about it. I would say that this is not an adequate reason for this method of dealing with the matter. It is not, I would suggest, a watering of capital. I do not think it is a satisfactory method for concealing profits nor—if I may quote my right hon. Friend for the last time and make use of his own colloquialism—do I think it is "sheer money for jam." It is not money for jam at all. In the first place, it is not money. [HON. MEMBERS; "Hear, hear."] Hon. Members opposite would assist me considerably by letting me make my speech my own way.
Having made it clear that I am asking for a further explanation at an appropriate time, may I make one or two suggestions? There are two points there which require answers. There is the suggestion that a bonus issue may offend in one of many ways. I suggest to my right hon. Friend that he has a perfect machine at his hand to deal with that—the Capital Issues Committee. He can give instructions to that body which can effectively prevent any offending bonus issue being made. There is also the question of Surtax. It would be wrong to me to speak out of school, as it were, in this connection. I wish to be quite neutral on this point, and merely to say that if, in fact, my right hon. Friend has in mind the possible evasion of Surtax then I should have thought that the answer would be to alter the legislation with regard to Surtax so as to catch those who ought to be caught and who might not be caught in certain circumstances.
I call his attention to this because it would seem to me that the final conclusion drawn by my right hon. Friend is one that is really quite untenable. He says that he is prepared to admit all this on condition that the public participate in a reasonable rake-off on these somewhat debatable operations. I should have thought that that was a very good definition of a black market—to participate in a rake-off on debatable operations—and I am sure that my right hon. Friend does not want to be known as "Black Max of the Bonus Tax," or to be twitted by hon. Members opposite as being "Purple Hugh of the Bonus Issue." For these reasons I ask him to look into this matter again. I well understand that it is far easier to
flatter a man into virtue than to bully him out of vice"—
and for that reason I repeat that, with this minor exception, it is difficult to find words sufficient to praise this Finance Bill which I shall have the greatest pleasure in supporting in the Division Lobby tonight.

4.59 p.m.

Mr. Wadsworth: One of the great advantages of having the Second Reading of the Finance Bill some weeks after the Budget, is that we have time to study the Chancellor's statement. It is very fortunate in this case, because the Chancellor is perhaps the most plausible and persuasive Member of the Front


Bench, and when one reads the Budget speech carefully, as I have, in cold print in HANSARD removed from the personality of the Chancellor, one finds what a poor thing it really is. 1n no direction does it appear to go very far. In fact, the Budget statement appears to be quite innocuous. What does the Chancellor do? He relieves the payer of earned Income Tax of some small tax if he earns up to £1,500 a year, but the amount does not exceed £50. Surely that is not a great step in introducing an incentive to make men work harder. A lower rate of Income Tax would be a very much greater incentive. The right hon. Gentleman has increased the Purchase Tax on certain electrical goods, reduced the tax on items like toothpicks and taken off the tax on artificial silk. None of these proposals appears to introduce the necessary incentive that is required at this particular time.
One great disappointment I received in the presentation of the financial statement was the over-emphasis on the importance of balancing the Budget. We all appreciate how essential it is that we should stop any inflation, but at the same time balancing the Budget is not so important as the balancing of our overseas trade balance. Yet the Chancellor of the Exchequer, in taking full credit for balancing the Budget—with Income Tax at 9s. in the £ I imagine it would be rather difficult not to balance the Budget—dismissed with a few terse remarks the very important overseas trading balance. I understand, although I did not hear it myself, that in his broadcast the same evening, there was again very little reference to this overseas trade balance. But it is a vital matter at this time. It overshadows everything else in the Budget, and I wonder if the people in this country really do know what is going to happen to them in the near future; for not enough emphasis was laid in the Chancellor's speech on this particular point. Perhaps I am being pessimistic, but we know we had a £400 million deficit in 1946 in our overseas trade balance. We are told in the White Paper on the Economic Survey that the trading deficit will be £350 million in 1947. We now realise in all parts of the House that that figure will most likely be £600 million, which means that, by the time the next Budget is introduced, we will have spent our Canadian and American loans.
We have three alternatives in that event. First, we can borrow more money. Articles have appeared in the Press, although one does not pay too much attention to them, to the effect that the Chancellor of the Exchequer is already considering this matter and is negotiating a further loan from America. I think we must realise that if we do borrow more money from America, we shall become literally the 49th State without the benefit of having a seat in the Senate. We can, on the other hand, cut down imports, and if we do so, it must be realised that we cannot cut down imports of food. We certainly cannot cut down imports of raw materials, which go to the manufacture of goods for export. We shall have to cut down the imports of raw materials from which goods for home consumption are manufactured. If that should happen, it should be realised that such a step will create unemployment, and that in the next 18 months there may possibly be unemployed between 2,000,000 and 4,000,000 men, unless, of course, a miracle happens and some fairy godmother presents us with a large sum of money to make up this trading balance. With all this background it seems to me that the Budget did not go far enough in creating the incentive to make people work harder and produce more goods.
It is not my intention to deal with minor matters in the Bill. I hope to have an opportunity on the Committee stage of criticising the Bill in greater detail but there are two matters I wish to bring to the attention of the Chancellor of the Exchequer and of this House. The first is the food subsidies, and the second, the high cost of the Civil Service. On the subject of the food subsidies I was completely dissatisfied with the Chancellor's attitude to them, particularly when they have reached as high a figure as £425 million. It appears to me that these subsidies are getting completely out of hand. It is true the Chancellor did mention that the Minister of Labour was introducing a new cost-of-living index in the near future Nevertheless it seems to me that these subsidies are a matter of urgency, and something should be done now. In any case, it must be realised that the food subsidies are helping the inflationary spiral. At the present time, according to the statistical review, weekly


wages have advanced by go per cent. Surely in view of that high increase it is not necessary to subsidise food to such a great extent. I will make it clear, because sometimes the people of this country do not appreciate it, that this is not a subsidy for agriculture, but a subsidy for the people of this country. There a distinction. I hope that the Government will be able to introduce an Amendment to the Bill whereby the Chancellor can, by stages over the next few years, decrease the large amount now paid in food subsidies.
Then there is the question of the Civil Service. I notice that the figure for March of the number of civil servants employed in this country showed an increase of several thousand. This matter is very urgent and the Budget and the subsequent Finance Bill are opportune occasions on which to press for some relief in this tremendous expenditure. I feel that a review of the whole position should take place at the very earliest opportunity of all controls exercised in this country at the present time. When there is a shortage of materials there must be some control, but in spite of that I think it would be well worth while to have a review of controls. In this regard I would make one suggestion to the Chancellor. In every industry there are organisations both of employers and employees, and it seems to me that many of these controls on raw materials particularly could be exercised by such a committee upon which are representatives from both sides of the industry with, I suggest, a representative or two from the Government. I should like the Chancellor to think of that suggestion. I imagine he knows exactly what I mean, and if he could induce industry to take certain responsibilities towards these controls he would be enabled to decrease the number of civil servants who are employed in respect of these matters.
Finally, I should like to say that the Chancellor does not appear to have used the Budget as a weapon to induce a greater incentive. He has not gone far enough in what he has done, and he has not used the weapon of the Budget to increase the standard of living. He has not said sufficient in his statement so far to make the people of this country realise how very urgent is this question of the overseas trading position, and that unless

there are drastic alterations throughout the whole country and unless the people of this country work as a team and recapture something of that Dunkirk spirit we shall be in. very grave difficulties in the near future.

5.13 p.m.

Mr. McGhee: I was rather surprised to hear the hon. Member for Buckrose (Mr. Wadsworth) talking about the provision of £425 million for food subsidies as being inflationary in character. I thought that it was the very opposite, and that the object of the Chancellor was to prevent by the use of these subsidies the price of food getting beyond control. I hope that the Chancellor will not listen to the advice which he seems to be receiving both from the Tory Party and the Liberal Party, to cut out the food subsidies.
There is one item at which he might look seriously, and that is the overseas trade balance, which has also been referred to by the hon. Member for Buck-rose. I want to see that adverse balance cut down as rapidly as we possibly can, but if we leave, aside the Government expenditure overseas, I think the account is pretty well balanced to within something like million. If the Government reduce the 300 million which they are spending overseas on troops and I am sure that it would be acceptable to the whole country. The hon. Member for Blackley (Mr. Diamond) made, I thought, a rather curious statement, namely, that bonus issue shares are ploughing back capital into businesses, and that there was no chance of people making a little bit "on the side." I thought one of the reasons for the issue of bonus shares was that they were saleable to the public afterwards, and that quite a good thing could be made out of them.

Mr. Diamond: As my hon. Friend the Member for Penistone (Mr. McGhee) has referred to the statement I made let me say that bonus shares are saleable to the public, but the short answer is that so were the shares which the shareholder held before. He sold a small proportion of the previous holding in precisely the same way.

Mr. McGhee: He would not get the same amount and he could not have suggested to the public that the company


was in such a good financial state, which I think was what the Chancellor was referring to in his Budget speech.
The right hon. and gallant Member for Gainsborough (Captain Crookshank) chided the Chancellor on the speech he made last year in which he told the Tory Party about all the things against which they were voting, by voting against the Finance Bill of that year. The Opposition, in voting against this Bill, are not voting against the military expenditure, because they have been wholeheartedly supporting the National Service Bill. They think that the Government ought to spend more money in that direction and get less in taxation by taking men out of industry. They have told us that they are not going to vote against the social services, and therefore the only thing they seem to be voting against is the Profits Tax. The right hon. and gallant Gentleman the Member for Gainsborough has missed the whole point of the cheap money policy. I am a pretty old Socialist, and I have always thought that the more money that went in interest, the less there was for wages. Now that the Chancellor of the Exchequer is bringing down the rate of interest, the answer, from the Socialist point of view is that there will be more money available for wages provided we do not let landlords take it in rent. That is one of the reasons why I shall go into the Lobby to support this Bill, in spite of the fact that it includes military expenditure which I do not like.
Last year, the Chancellor of the Exchequer, in reply to my hon. Friend the Member for Ipswich (Mr. Stokes), referred to the possibility of rating land values or introducing a tax on land values, and promised that he would consider the suggestion. I now ask him to go a little further than mere consultation with his colleagues in the Cabinet. Many local authorities, since he made that statement, have asked for powers to enable them to rate land values. The Chancellor should disclose the result of these discussions, and should give a clear declaration of what the Government propose to do before the next Budget is introduced. From his speeches, and from the policy of the Government in regard to other Bills, I detect that the Government have come to the conclusion that the change in ownership of land has been so rapid over the last few years that the people who should have been rated or taxed have got away with

the swag. I would remind the Chancellor that the drawing of rent is a continuous process and is constant robbery of the wages of the working classes. I hope that he will look at this matter from that point of view. The Chancellor of the Exchequer would find it a dangerous argument to use, that because someone had bought something he should not be taxed upon it, if it were applied to gentlemen who buy and sell in the black market. I do not think the Home Secretary would listen to it.
The policy on this issue has been clearly stated for many years past. In 1936 we came down definitely for a policy of a rating of land values, and we made it clear to the country that we would implement our promise. I hope that the Chancellor will add to the scheme of block grants which he announced in his speech at Bishop Auckland yesterday, his intention to carry the policy of relieving the local authorities further in this direction. I notice that we have abandoned the 1939 value in the Town and Country Planning Bill. I am one of those who thought that the 1939 value would never be ascertainable and ought to have been abandoned a long time ago. I know that where development has already taken place, there will be no method of collecting development charges. I suggest that by enabling local authorities to adopt land value rating would be a lever to drive owners of undeveloped land and dilapidated property to redevelop. It would ease the burden of rates for private enterprise shopkeepers and the great masses of the people in this country who are living in highly rented and rated homes. I asked the Chancellor for a clear and straightforward declaration, and a specific pledge that in the coming Session we are to have some effort made to enable authorities to collect this revenue which lies ripe in their hands.

5.25 p.m.

Sir Frank Sanderson: regard the Budget in the same light as I do foreign affairs. The Budget is to our national affairs what foreign affairs are to our international affairs. Therefore, I cannot help feeling that party politics should not play the principal part in considering subjects which are so vital to the nation. There are points in which I am in agreement with this Bill, but there are others to which I take exception. I am in complete agreement with


the Chancellor of the Exchequer in the policy he has pursued in respect of cheap money. My right hon. Friend will agree that this policy dates back to the time of Mr. Neville Chamberlain, who made the first important conversion from 5 per cent. to 3½ per cent. It is gratifying to me that the Chancellor of the Exchequer has continued that policy and accentuated the rate of decrease in interest. Having said that, I consider the time has come to call a halt, or, at any rate, to review the whole position in the light of present events. I am not suggesting for one moment that the Chancellor should increase the rates of interest, but that it may be expedient to apply the brake at the present moment.
I want now to say a word on the Budget surplus. No one could feel more happily than I do in regard to a policy of budgeting for a surplus in the years when industry is prosperous, and I think he will find that he has underestimated rather than overestimated the surplus which will accrue in the present financial year. I am very troubled whether in fact this surplus is real. Last year I made special reference to the importance of having a national balance sheet produced. What concerns me is that income normally coming from taxation is confused at the moment with capital assets. We do not know to what extent money which was expended on capital assets during the war have been liquidated, nor how the proceeds have been disposed of. As far as I can follow, income or money received in respect of those assets is regarded as part of the national income. I should like to see a statement of our national expenditure classified under their different headings, and I would like to see expenditure on important capital assets, and how they are disposed of. I would ask my right hon. Friend to consider this point.
During the war years the Government had expended hundreds of millions of pounds upon capital assets and upon consumable goods. For instance, the Government purchased the whole of the Egyptian cotton crops and the whole of the wool clip from Australia and New Zealand. We purchased the whole of their wool clip not only for the war period, but for 12 months afterwards. We have never yet had a statement to show how much has been expended upon these commodities,

and how the money received from the sale of these commodities has been worked into the national balance sheet. I would like to know from the Chancellor whether we are to be given any information about the quality and volume of money those purchases represent. Are these stocks to be manipulated and the money derived therefrom to be regarded as part of the national income? If so, it would, in my opinion, be quite wrong, because they are capital assets, and should be treated as such. We are entitled to ask the Chancellor whether he is prepared to give us any information on the lines I have indicated.
I would like to say a word or two about the increased tobacco tax. I am in complete agreement with the Chancellor on this matter, for several reasons; it is essential that we should reduce our dollar expenditure, and although this is but a small contribution it is, nevertheless, a contribution in the right direction. I am surprised that the Press and many people have protested so much about this increase in the tax. What the Chancellor did was to put a tax on tobacco imported from America, thereby saving dollars. Moreover, this tax has the advantage of being one which he can collect without difficulty. Why object to the tax, since what the Chancellor took with his right hand he forthwith gave away with his left hand? He gave it away in the form of children's allowances, an extra £15 million a year; he gave to dependent relatives some £10 million a year; he gave to the relief of earned income £62 million a year. The Chancellor takes from us £77 million in the form of increased tobacco tax in a full year, which we may or may not pay, according to whether or not we desire to smoke, and made us a present of £87 million in remission of taxes. In the aggregate the taxpayers have £10 million to their credit. I regard that as a remarkable achievement.
We must also find other methods of saving dollars, and also of balancing our external credit. Our primary objective should be to balance our external account before—and I deliberately say "before"—the American loan runs out. This should take precedence over all other economic considerations at the present time. Whatever sacrifices it may be found necessary for the country to make to balance our external budget, I believe that if the people are taken fully into the


confidence of the Chancellor he will find that they will rise to the occasion. I believe that whatever sacrifices they have to make will be minor compared to the alternative, which is, and can only be, inflation. That would mean that some 20 million people who have effective savings, who have invested their money, in one form or another, in Government securities, would find that their purchasing power would become increasingly less. Rather than face that, I am sure the people of the country will help the Chancellor to make such sacrifices as may be found necessary to enable him, at the earliest opportunity, to balance our external budget.
The country should be told exactly how we stand in regard to our sterling balances. Is it proposed that the sterling balances should be blocked for the time being? If it is, this is vital as a preliminary step. I suggest that the next step should be to raise our general level of exports to fill the gap between imports and exports. We know not how long it may last, but, at the present, we have a sellers' market. Are we making the best use of it? I am open to correction, but I am told that considerable sales of goods by the Government to foreign countries have been effected at prices considerably less than they could have obtained for those commodities. If that be so, then to the extent to which they were sold below the market price there has been a loss of dollars to this country. The Government and industry should, at this time, take full advantage of the sellers' market to get maximum prices, so that we can increase the number of dollars available to meet our purchases.
It is, I believe, the general view that—t industry could secure the necessary raw materials, coal, and labour it could produce the commodities and find the markets for export which would close this gap. It is for the Government to decide whether it is possible to achieve this objective and how best this can be done. It will only be done at a sacrifice, possibly even of the building of homes, factories, new schools and Government offices. A short-term policy and a long-term policy should he drawn up. Taking only the short view, I believe that it would be far better to meet the situation and close the gap, so that we could save the pound sterling from inflation and honourably look it in the face.

5.42 p.m.

Mr. S. N. Evans: It is strangely ironical that the hon. Member for East Ealing (Sir F. Sanderson) should be concerned about an inflationary situation which the right hon. and gallant Member for Gainsborough (Captain Crookshank) described as "too much money chasing too few goods." I understand that the hon. Member's company has just doubled its dividend from 25 to 50 per cent., and I should have thought that if there was an inflationary trend that sort of thing would have accelerated it.
I am one of those who feel that 5th July, 1945, brought a revolution to this country. It is true that it was effected by ballots and not bullets, by paper crosses and not wooden crosses, by counting heads instead of breaking them, that it was a revolution by consent. Nevertheless, it was a revolution. To conduct a revolution by consent is a very delicate operation. It calls for the good will and collaboration of a large number of people including, let it be said, working directors, managers, technicians, research workers, and the like. In these circumstances, I think it is ill-advised to infer that other than the organised workers of this country are of no account. If we are to be successful in the great social and economic experiment in which we are all engaged we must carry these people with us. In this connection but turning from the national to a somewhat lower plane, may I recall that in due course we on these benches shall have a General Election to fight, and that not all of us have five figure majorities?
I would like to say a few words about the flagrantly anti-social and psychologically stupid practice of boards of directors who substantially increase dividends in present circumstances. Some of us go out into the provinces at the week-end and talk to those among whom we were born and with whom we have grown up to the effect that they must bend their backs as never before. We have to change the psychology of many of our people, and it is not easy. The workers filled the shelves in the shops and the holds of ships once before only to find themselves subsequently unemployed by the million. This business of getting them substantially to increase output presents very serious difficulties. About the worst possible thing that could be done m present circum-


stances while we are making this effort is for beards of directors to engage in a policy of going boards in this matter of dividends. Let me quote a few examples: Harrods, within a mile or two of this building, from 14 per cent. to 20 per cent.; John Barker 15 to 25 per cent.; Woolworth 50 to 70 per cent.; Marks and Spencer 50 to 60 per cent. To be fair perhaps I should mention that one firm, the London Necropolis, has had to reduce its dividend. Whether that is because people live longer under a Labour Government and thus reduce turnover, or whether it is because the Minister of Fuel is charging them more for their raw materials, I do not know. There are honourable exceptions to the course of conduct of which I complain. For example, whereas the textile firm Salts (Saltaire) pay 50 per cent. instead of 25 per cent., on the other hand, the great institution Courtaulds stand firm and plough profits back into the business.

Sir F. Sanderson: I happen to be Chairman of the Salts (Saltaire) company. It is only fair to remind lion. Members that the shares were written down from £1 to is., so, in fact, the shareholders received 2½ per cent. on their original investment and not 50 per cent.

Mr. Evans: I cannot think for one moment that this is the time for boards of directors to rectify a situation which they may think requires to be rectified. When the nation has passed through its present economic crisis, there will be plenty of time to restore the rights and privileges of shareholders. As I have said, there are exceptions—Courtaulds is one and Leyland Motors is another. I have no doubt that there are others. I would commend to commercial and industrial organisations the example set by such firms who are shining examples of all the best that there is in private enterprise.

Sir William Darling: The C.W.S., for example.

Mr. Sydney Shephard: Would the hon. Gentleman agree that the monetary value of a 20 per cent. dividend today is not more than a 10 per cent. dividend before the war?

Mr. Evans: I am not going to enter into arguments about that. There are today

tens of thousands of railwaymen and those who work in and about the coal industry who are getting not more than £4 14s. a week. I have talked about revolution by consent. When the present Parliament comes to an end, 80 per cent of the means of production in this country will still remain in private hands. If that sort of thing is to continue, the State will be compelled to make much greater inroads into the field of territory left to private enterprise. We cannot induce 22 million workers in this country to work as never before while this sort of anti-social nonsense is going on. Directors may ask, "What else can we do with the profits?" They can cheapen the product and if they do not want to do that, let them make substantial investments in Government stocks; or if they want to assuage their consciences a bit they can contribute to the rehabilitation of those industries which are in a most appalling condition
It is partly because those whose political instrument the Tory Party has always been, chose to live on their accumulated fat between the two wars rather than embark on measures of reconstruction which the march of science called for that we are in our present plight. That would be an admirable way of disposing of the money instead of distributing it in the form of increased dividends. Thirty thousand pit ponies half way through a mechanised 20th century, 60 year old locomotives still dawdling along, 75 year old cotton mills equipped with 75 year old machinery—all form part of a pattern of industrial decay inherited by the present Government. The benches opposite must bear the responsibility for that because they have always been the political instrument of those responsible for such conditions. So I say that boards of directors need have no difficulty about making up their mind as to what they should do with their surplus money. It has been said by the right hon. and gallant Member for Gainsborough that the tax on profit should be done away with, but I warn the Chancellor of the Exchequer that there will be a hell of a row if he interferes with that.

5.52 p.m.

Sir Arnold Gridley: I hope that the hon. Member for Wednesbury (Mr. S. N. Evans) will forgive me if I do not follow on the same lines. I want to deal with three points of principle in the Bill. Before doing so, I wish to enter a most vigorous protest against the tortuous


drafting and complexity of this Bill. Finance Bills, as we all know, are usually complicated and extremely difficult to understand, but I think that of all the Finance Bills I have endeavoured to interpret, this is the most complicated. I have tried to get explanations from some of my friends who call themselves financial experts, but I find that they are quite unable to interpret the real meaning of some of the Clauses.
In referring to the three principles in the Bill, I would deal first with those relating to retirement—Clauses 14 to 18. These appear to me, as I have no doubt they appear to most other hon. Members, as being quite unintelligible. They seem to be penal Clauses, for it would appear that they will tax benefits twice over. What they do is to add confusion to the existing bad system, for the present method of dealing with retirement is both illogical and inconsistent. Why do I say that? For example, pension fund contributions and investment income are exempt from tax, while the funds are being built up before retirement, and retirement pensions are taxable when the pensions become payable. For some reason or other, the provident funds are differently treated. Employees' contributions are not allowed to be deducted. The employers' contributions to the fund are free of tax, but the investment income is taxed. The benefits when they are payable are tax free. There, we have a curious state of affairs.
The new provisions which are now proposed, instead of bringing the provident funds into line with superannuation funds, will tax the employer's contribution as income of the employee. I ask hon. Members to mark this. This means that the employee will be taxed on something which he has not in fact received. I notice that the learned Solicitor-General is looking a little puzzled about this. I think that he will find that what I am stating is a fact. For example, if an employee were in receipt of a salary of, say, £500, and he and his employer were each coif tributing five per cent. to the provident fund, then the employee will be taxed on £525, although, in fact, he will be receiving only £475. That is the position. It is not easy for me to understand from these Clauses whether pensions which are paid within the medium of a fund are within these Clauses or not. That is a question which will have to be cleared

up. In the case of part-time directors, it would appear that there is double taxation because the present day value of the pension is to be taxed as income in the year in which the director retires. The pension itself will also be taxable when it arises in the ordinary way.
Again, lump sum benefits secured by a policy with an insurance company will be taxed on the employee when the premiums are paid. Moreover, if the policy should assure an annual sum instead of a lump sum, the employee will be taxed not only during the life of the policy, but also on the annuity when he receives it. Lump sum payments, payable on retirement, are taxable when secured by service agreements, but not otherwise. The Clauses would seem to attempt to define the premium which would purchase that lump sum if paid as a premium during each year of service. How is this possible? Who can fix the amount of the premium, and if the retirement date and the exact amount are not known in advance—in such a case as a promise to pay a sum equal to one year's salary—who can possibly calculate the sum in the manner required by these Clauses? I think that these criticisms justify my having said that there seems to be a complete absence of principle in dealing with retirement funds.
I urge most strongly that these five Clauses should be withdrawn, and that entirely new provisions should be brought in to deal with retirement pensions as a whole, so as to bring them into line with conditions applying to superannuation funds. Now, what should the principles be? Here, I think, we should all be in complete agreement. Surely, the principle should be that all the costs of purchasing benefits should be free of tax as expenses in the year in which they are paid, and in the case of funds, whether provident or pension, the investment income should be free of tax. Then, all benefits should be made to pay tax, whether in the form of pensions, gratuities or annuities. Lump sums can be converted into pensions notionally at the date they are paid by reference to the age of the recipient, and on a given rate of interest. The lump sum should be taxed at that moment at the average rate of tax for which the recipient would be liable if he received that notional pension in that year.
I want all this to be on the record. I know it is very complicated, but it does require a great amount of thinking over. I do not expect hon. Members on either side of the House to be able to follow clearly what I am saying. I have had the greatest difficulty in arriving at these conclusions myself, but I honestly believe that I have here made out a case which requires the most careful consideration on the part of the Treasury, the legal advisers and the draftsmen, because I think there is no difference of principle between us. What I am advocating is what we would all be prepared to urge, and the whole position would be simplified, clarified and equalised. Finally, on this particular matter, I say this. Why should not the provisions in these Clauses apply equally to civil servants, who on retirement customarily receive gratuities, and so on, which are tax free? Why should those employed by the Government be more favourably treated than those in similar occupations in industrial service? That is a point which the Government should consider seriously. All I ask on these complicated and, as I state definitely, most unintelligible Clauses, is that the arguments I have submitted are considered most seriously by those whose duty it is to listen to criticism from this side of the House.
Now I wish to say a word or two on the Profits Tax. It has been said before, quite rightly, that one of the defects of this tax is that it falls wholly on the ordinary shareholder, which, of course, it does. The tax on the profits distributed to preference shareholders becomes an ordinary shareholder's liability, and it may quite well be a most grievous burden in the case of some companies whose preference share capital may be many times that of the ordinary share capital, and, as is not infrequently the case, it may conceivably be an even higher burden than the previous Excess Profits Tax proved to be. The Government ought to appreciate that this is a retrograde step in regard to our single tax system which has been the envy of other countries of the world. The Government have, rightly, in the last two or three years been endeavouring to remove double taxation; but here we are taking a retrograde step by ourselves imposing double taxation. Firstly, there is the 12½ per cent. tax and then there is In-

come Tax on the distributed dividends. I ask the Government to cogitate on this. That is a point over which I ask them to ponder.
There is another example of the confusion one gets in studying this Bill. There seems to be a hidden menace in Part II, Seventh Schedule. If I understand it, the liability to Profits Tax has to be calculated back from 1939 onwards. Deferred repairs, lump sums under superannuation funds for back services and suchlike were allowable for E.P.T., but not necessarily for Income Tax. During the war years, allowances for N.D.C., which was a Profits Tax, operated in the same way as for Income Tax. Now it would seem that allowances in Part Seventh Schedule, are to operate as they would have done under E.P.T. I admit that justification for this might possibly be made out do pure theory. But just look at what an appalling amount of arithmetical work it will involve. Accountants and Income Tax inspectors will have to work back at what the liabilities will be from 1939 onwards if these provisions come into operation, and if I interpret them correctly; and this at a time when, as we all know, the work of the Inland Revenue Departments is hopelessly in arrears. The unfortunate staffs are struggling heroically with a mass of work with which they are quite unable to cope, yet now this Bill will thrust Heaven knows how much unnecessary and heavy work on top of all that. I suggest most strongly that this matter should be looked into again. I think the Chancellor will find, when he examines the criticism I have made, that it is one which is well founded. I would not be too certain of anything I am saying this afternoon, because of the extreme difficulty of anybody being able to find his way about this very complicated Finance Bill.
In conclusion, may I say a few words about the 10 per cent. tax on bonus issues? We had a very sensible contribution earlier this afternoon from the hon. Member for the Blackley Division of Manchester (Mr. Diamond), whom I do not see in his place at the moment. What he said in criticising the Chancellor's four objections to these bonus issues was very sensible. My view about this 10 per cent. tax on bonus issues is, that it is barren either of logic or of principle. If the Chancellor will allow me, I will


explain why I think that by means of a simple illustration. Let us take the case of an investment company which holds 100,000 £1 ordinary shares in some manufacturing company, which £1 shares are quoted on the market at the time they were purchased at £4 per share. At some later date that manufacturing company, having kept a lot of its profits back in reserve, decides to make a bonus share issue of one free share for each paid up share. The investment company would then hold 200,000 £1 shares and, theoretically, the Stock Exchange price should not rise; the price should be the same, £4 for two £1 shares, for this reason: the issuing of bonus shares does not increase the assets of the manufacturing company, the assets remain at precisely the same value as before. But it does frequently happen—and one has to admit it—that when a bonus share issue is made the Stock Exchange value rises. For my illustration I shall assume that instead of the two shares being valued at £4 they each rise 10s. a share, so that two £2 shares are then valued at £5, the £1 shares being worth £2 10s. each.
Now what happens? The holders of the original shares have lost a value of 30s. a share, because the shares which they formerly held worth £4 are now quoted at £2 10s. What happens to the manufacturing company? It has issued 100,000 bonus shares valued how? This is how I interpret these Clauses which deal with the bonus tax. Under the Bill, and in accordance with my illustration, they will be valued at £2 10s. per share, because that is the price—if the price does rise to £5—at which the Stock Exchange values each share. Therefore, this 10 per cent. tax would apply to 100,000 bonus shares valued at £2 10s. each, which is £250,000, involving a tax of £25,000. I say that penal taxation of that kind will stop all bonus issues. Nobody will venture to incur a tax of that kind which, in itself, is bound to depreciate the value of the shares. In logic there is no justification for a tax on bonus issues, but if the Government do want to make out a case—and here I am anxious to be helpful to them—the tax should surely apply to the value by which the shares have risen; in other words, if the original issue of 100,000 shares was valued at £400,000, as they would be on my illustration, and the price rises by £1, the value of their 200,000 shares would have

risen from £400,000 to £500,000, an increased value of £100,000. Then, by all means, apply the 10 per cent. tax to that increased value of the whole issue. There, I think, the Chancellor would have a tax with which it would be difficult reasonably to quarrel.
The basis of the taxation proposed in these Clauses of this Bill is wholly illogical and penal, and will defeat the object the Chancellor has in view. I have confined my remarks to the three principal provisions of the Bill to which, at the moment, I attach the greatest importance. The Chancellor has not been present during my contribution to this Debate, and if he is not in a position to reply tonight I hope the Solicitor-General will see that careful consideration is given to the arguments with which I have ventured to trouble the House in regard to these three principles.

6.15 p.m.

Major Bruce: I should like to follow the hon. Member for Stockport (Sir A. Gridley) in the remarks which he has been addressing to the House on the subject of bonus shares. There appears to be a considerable amount in what he says. I heard earlier the remarks of my hon. Friend the Member for Blackley (Mr. Diamond) on the same point. I thought that he rather appeared to over-simplify the position The case for bonus shares as presented to us originally was that their issue was a transaction in which a certain amount of swag was distributed. On the other hand, my hon. Friend the Member for Blackley presented it as though the transaction was one from which not much profit arose anyhow. I thought that the hon. Member for Stockport put the case very well in relation to the actual assessment of profit which he would apply to bonus shares. From an accountancy point of view there is no actual change in book values, no assets are distributed by the company, but claims to the assets in the form of shares are redistributed. I was very pleased that the hon. Member mentioned the point that for some inexplicable reason—at least he did not explain it—redistributed share values did in fact rise. That is due to two reasons. In the first place when bonus shares are issued it usually makes the whole share issue more marketable in the sense that they are then for lower price denominations. In the second place, the fact that a company


decides to issue bonus shares gives their market values a buoyancy which does result in the appreciation to which the hon. Member for Stockport has referred
I am inclined to regard the tax as one which will inflict no great hardship on the community. Its effect is on a very limited class and the Chancellor has to get money from somewhere. I cannot help bearing in mind a point of view which the Chancellor had in mind when he first decided to impose the tax. I have in my hands a text book which bears the distinguished imprint of the firm of the hon. Member for Bath (Mr. Pitman) and the author of which is a colleague of mine in my own profession who, talking of bonus shares, says:
If profits are largely increased, the distribution of profits over a large number of shares will reduce the rate of dividend paid. This may be considered expedient to conceal from the workers the fact that high dividends are being paid.
I think that that is one of the points which the Chancellor may have had in mind, and that he decided that he wished to discourage that particular kind of operation.
I will leave the subject of the tax on bonus shares in order to address some remarks on some observations which fell from the right hon. and gallant Member for Gainsborough (Captain Crookshank) earlier this afternoon, in which he said he thought that the Budget had failed in that it did not make a sufficient provision for increasing incentives. One of the ways in which a Budget can be used to provide increased incentives is, of course, by the reduction of taxation. About that there is no doubt, but in present circumstances the case as made out by the Opposition is that the reduction of taxation can only be accomplished by a reduction in Government expenditure. On every Second Reading Debate or other opportunity they have had of dealing with this matter of the general position, they have always insisted on the necessity for drastically reducing expenditure. So far those demands have not been very much particularised, for the simple reason that hon. Members opposite cannot ignore the electorate Even if it were not possible at the present time to do that, and I think it is possible in some directions—many hon. Members on this side of the House have been making representations about a reduction of the Armed Forces—

there are other ways in which taxation on those incomes or gains which provide an incentive necessary at this time can be reduced, and that is by changing the incidence of taxation.
The current impression is that Income Tax, which is one of the taxes I wish to discuss, is a tax upon all gains and earnings. That impression arises from the reading of the Income Tax Act. I am particularly referring now to the tax chargeable under Schedule D. of which the Act says:
Tax under this Schedule shall be charged in respect of—
(a) The annual profits or gains arising of accruing (1) to any person residing in the United Kingdom from any kind of property whatever
and the impression is current that all gains and earnings arising in any one year are properly liable to Income Tax. In fact, that is not the case. I would like to draw the Chancellor's attention to the fact that there is considerable need for closing some of the gaps that exist at present. It is not true to say, as is generally said at the moment, that all gains and earnings are in fact, liable to tax. I do not want to weary the House unduly, but the principle is rather a refined one. I would like to quote from the leading judgment which lies at the whole basis of the determination as to whether a gain or earning shall be liable to Income Tax or not. Lord Justice Farwell in the case of the Hudson's Bay Company versus Stevens said:
It is clear, therefore, that a man who sells land, or pictures, or jewels is not chargeable with Income Tax upon the purchase money or on the difference between the amount he gave and the amount he received. But if, instead of dealing with his property as owner he embarks on a trade in which he uses that property for the purpose of his trade, then he becomes liable to pay, not on the excess of the sale prices over purchase prices but on the annual profits or gains arising from such trade, in ascertaining which these prices will no doubt come into consideration.
From that judgment it is quite clear that capital profits as such are not at present liable to Income Tax. In this country at the present time there are capital profits that are being realised and made on a very wide scale, which do not attract taxation in any form. I would like to give some indication of what I mean, because the House may wish to consider whether the existing Amendments to the Income Tax Acts under the Finance Bill go far enough to provide the incentive


which we all require. Persons owning property or possessions not required for their immediate use, and with the possibility of replacing them at a later stage—if required—at lower prices, have tended to realise these at a handsome profit, which, owing to the fact that it does not attract taxation, is proportionately more valuable. That is the kind of transaction which is going on at the present time on quite a large scale, and the profits of which are not liable to tax.
There is a second kind of transaction, that of a person who runs a business either on his own or in partnership, who may decide to turn it into a limited company. A capital flotation takes place and the profit made by the partners, or the individual trader concerned, on the sale of that business is not, under present law, taxable. There is a further kind of case in this regard which needs stopping up. There are companies which may be formed for one stated purpose, and which may acquire assets, ostensibly for that purpose, and then, for some reason or other, they may decide to abandon the original trading project for which the company was formed and dispose of the assets they have acquired or developed. If they do so at a later stage, at a profit, which in scarcity conditions they can certainly do, the profit which they make on capital assets is exempt from all taxation at the present time.

Mr. Donovan: That is not quite correct.

Major Bruce: My hon. and learned Friend will have the opportunity, at a later stage, of stating his viewpoint. Capital appreciation realised on the winding up of a company is distributed to the shareholders free of Income Tax as such. There are numerous transactions in securities, which being theoretically casual transactions, fall outside the scope of Income Tax, and are yielding valuable dividends at the present time These capital appreciations are taking place on a very wide scale. People are seeking to realise capital assets at a value which has been considerably enhanced in order that they can now claim tax free income instead of deferring their claim to it later, when they would have to pay tax on it, should it be reflected in future trading profits.
These capital appreciations have arisen in two ways. In part they have arisen

owing to the skill of all those concerned in the development of the asset and who have imparted to it value greater than appears in the monetary cost by reason of the intrinsic condition of the asset, or owing to the particular process of development. There is a good case to say that that should not be taxed. That position is followed up in the Income Tax Act, 1945, which actually permits certain capital expenditure being charged for the first time to be charged against income. I do not think that any such profit as arises from the individual effort or skill of the individual developing it should necessarily fall for consideration under the heading of capital profit for this purpose. But the main reason why capital profits have arisen and have been realised in the months since the war is the scarcity of commodities themselves. There has been an imposition of real conditions of scarcity on both capital and consumer commodities, and the fact is that there has been a scarcity of consumer commodities when plenty of money is in circulation. The note circulation in 1938 was £446 million, In March, 1947, it had risen to £1,372 million. That tends to send up the demand for capital goods themselves, either for retention or enjoyment, or for the manufacture of consumer goods or for resale on a sellers' market. If, of course, capital goods are themselves in short supply, and are subject to inflationary pressure through a shortage of consumer goods, then their value becomes inflated to a degree far greater than it would otherwise have been.
There is a case either for altering the existing Income Tax Act by appropriate Clauses in the Finance Bill at a later stage, so as to close up the gaps in relation to some of these capital profits, which are, in fact, gains or earnings within the normal sense. That can be justified, because undoubtedly the capital appreciations which the nation is now experiencing are the result of conditions which all the nation endures. All the nation suffered from the effect of the war; all the nation shared its dangers—

Mr. Assheton: The hon. Member is developing an interesting argument, but if he suggests a tax on capital profits how would he treat capital losses? How is that to be worked?

Major Bruce: I had anticipated that that point would be raised from the benches opposite and I will come to it. As I was saying, the capital appreciations which we are now experiencing arise directly from the fact that the nation as a whole endured shortages in the war and sustained damage. As a result of the war and of the burdens shared by all, these capital values have risen very considerably indeed, but the realised benefits arising from this increase have not been shared equally. They have only accrued to the owners of property, and, more specifically, to the large owners of property and large owners of investments.
There is, therefore, a prima facie case for redistribution by some form of taxation which will enable a reduction to take place in the taxation of people whose earned income comes under Schedule D or E. A tax levied on realised capital profits would enable relief of taxation to be made, or, alternatively, it would enable the Chancellor, should he not desire to do that, to reinforce the Budget surplus, which I again heard described today as "phoney," and which is no more "phoney" than Mr. Asquith's Budget of 1920–21. It would furthermore give the workers of this country some opportunity to feel that the realised capital profits which are being made on a very wide scale at the moment, and which they know all about, were attracting the same taxation which their own hard-earned money attracts at the present time.
There is, of course, a case against either a new tax to cover this, or an amendment of the existing Finance Act by the introduction of a new Schedule—Schedule F—to the Income Tax Act, 1918. The first objection raised is that the person or firm realising the capital profit, or the enhanced price, really gains nothing at all, since he has to replace it at current prices. I do not think that argument holds good—

Mr. S. Shephard: Would the hon. Member agree that the argument holds good in the case of a man owning a house who has to sell it because he has moved to some other part of the country. where he has to find another house?

Major Bruce: I was coming to that point shortly. I am talking of large amounts of realised appreciation that normally takes place where the assets are

not immediately required for trading purposes or for use. The real answer to the objection raised is that the man would not sell at a loss.

Mr. S. Shephard: The hon. Member has not answered my argument yet.

Major Bruce: I propose to do so. The other objection made to this proposal is the one touched upon by the right hon. Member for the City of London (Mr. Assheton), who said it would be necessary to grant rebates in the case of capital losses. I do not think this is necessary, but, if we concede that it is necessary, one has to bear in mind that there is always an inertia against making a loss. People do not make losses deliberately for the purpose of obtaining tax rebates, and some similar provisions could be applied to this particular tax as now apply to tax under Schedule D assessments, in which case, under Section 33 of the Finance Act, 1926, certain losses can be recovered within six years of the year in which the loss was made. I do not see any particular reason why this provision should not be inserted. The right hon. Gentleman is presuming that deflation may take place. I thought that the burden of the argument of the Opposition, by and large, was that we were being driven headlong along an inflationary policy in which case it is difficult to understand the importance of their objection.

Mr. Assheton: There are other ways in which one can lose money than inflation or deflation. Suppose that a property is destroyed by the enemy and no income is received from it, and that the owner is likely to remain without income until the property is rebuilt, that man may be involved in considerable loss.

Major Bruce: I entirely agree, and I was only arguing in the generality. The third argument that might be made against the imposition of a tax of this kind is the impracticability of finding the staff necessary in the Inland Revenue Department. I am bound to say that this is a little more formidable objection than the others, although not half as formidable as people would have us believe. In fact, the bulk of the people to whom the tax would apply are people who already employ their own accountants. I speak as a professional accountant, and I say that accountants do not find this particularly difficult, and I do not think it really would mean so much


technical trouble as might appear to be the case to the layman, although I would agree that it would mean an immediate increase in the already overworked Inland Revenue staff. The final argument against it is that it would tend to discourage capital improvement. I think I can answer that by saying that an allowance for capital expenditure of a development nature is already made in Income Tax under the 1945 Act, and a genuine trading concern would not be likely to hold up improvements, especially as they would be using assets to produce income and not for the purpose of capital appreciation.
I would like the Chancellor and the House to consider seriously whether, in our existing circumstances of heavy inflationary pressure and of very heavy Income Tax upon all wage earners and salary earners, it might well be advisable to see whether we can depress their burden and shift part of the incidence of taxation from those who are, at the present time, putting forth as much muscle and brain as they can, in management as well as in the working spheres, to increase the country's production, and so shift the incidence of taxation from those people by tackling this problem comprehensively by the imposition of a suitable tax. I have some suggested rates: Under £1,000 a year, nil; between £1,000 and £2,000, 1s. od. in the pound; between £2,000 and £5,000, 1s. 6d. in the pound; between £5.000 and £10,000, 2s. in the pound; between £10,000 and £25.000, 3s. in the pound; and over £25,000, 5S. od. in the pound. Alternatively an endeavour might be made to bring such profits within the scope of the existing Acts. I think we should consider whether, by shifting the incidence of taxation towards these capital appreciations, from which only a limited class are benefiting at the present time, we can help, not only to solve the Chancellor's Budget problem, in order that he may have and maintain the surplus which we all wish him to have, but also to ease some of the burden borne by the ordinary working people in these trying times.

6.38 p.m.

Colonel Crosthwaite-Eyre: The hon. and gallant Member for North Portsmouth (Major Bruce) spent a good deal of time talking about what he called capital profits. I think he has laboured from the very

beginning under a complete misconception of what the policy of the Government is. If the hon. and gallant Member looks at the hoardings that must decorate his own constituency as they do mine, he will see that every class is now being urged to save, not only through the National Savings Movement, but through investing in industry. The hon. and gallant Member must also have seen the current appeals by the Chancellor of the Exchequer to companies to try to develop. All that he has done in the speech which we have just heard, has been to make absolutely invalid everything which the Chancellor said, because, according to what the hon. and gallant Member said, every saving which a company might have made in order to develop its business, would result in an accrued capital profit, for which it is to be penalised.

Major Bruce: I do not think the hon. and gallant Gentleman wishes to misrepresent what I said. I spoke of capital appreciation; I was not then referring to ordinary development and improvement of capital, to which I had referred earlier.

Colonel Crosthwaite-Eyre: Unfortunately, the hon. and gallant Gentleman does not understand that if the company saves and makes a capital appreciation, in due course it will be taxed; otherwise there is no point in what the hon. and gallant Gentleman said. If he does not appreciate that point, I suggest that the position of chartered accountant, of which he made a boast, is one of which he is not worthy. This is a matter which is too little understood by hon. Members opposite. There is nobody more willing than hon. Members opposite to agree to increases of wages and reduction of hours. They are willing to accept these things, and they consider them as something in the nature of an advantage, which comes from a Socialist State. They do not realise that such a tax on industry will increase the cost of an article produced, without increasing the number of articles on the market. Do they not realise that it has to be borne by the industry as a whole, and is therefore, a capital cost? Why should it be so, when they see the placards all over the country "We Work or Want"? Hon. Members opposite, both on the Front Bench and on the benches behind, welcome every effort to improve production, and, at the same time, condemn every increase of interest for those


who contribute to the success of that industry. Wages have gone up by 20 per cent. and hon. Members opposite support that movement; yet, at the same time the very fact that the interest to the people who provided the capital should have gone up in the same proportion, is condemned and greeted with laughter on the opposite side of the House. What is the difference? Is it, in truth, what the Minister of Fuel and Power said the other day—that they do not care a "tinker's cuss" except for organised labour? Is it that, so long as they can appeal to the organised workers of this country for their support, they do not care in the least what happens to other sections of the people? What answer can they give?

Mr. Douglas Jay: Surely, the hon. and gallant Member would not deny that, by and large, wages are paid to people whose incomes are rather smaller than those of the people to whom he referred?

Colonel Crosthwaite-Eyre: That is absolute nonsense. The Chancellor made an appeal to companies to save and asked them not to distribute their profits but to use them in developing the businesses with which they were concerned. Is it suggested now that there is a difference between the people who contribute to the development—the workers and management—and the shareholders of the company who contribute towards the general success of the enterprise?

Mr. Jay: indicated dissent.

Mr. Mitchison: Could the hon. and gallant Gentleman make it clear to me, because I am one of those people on this side of the House who are so stupid on these matters, what exactly is it in the case put to him from these benches which he has described as "nonsense"?

Colonel Crosthwaite-Eyre: I described as "absolute nonsense" the suggestion that one could differentiate between the contribution made by the worker, that made by the management and that made by the shareholder of the company towards the general success of the enterprise concerned.

Mr. Mitchison: With great respect, the point that was put to the hon. and

gallant Gentleman was that profits, on the whole, went to people with higher incomes than those who received wages. Why is that "absolute nonsense"?

Colonel Crosthwaite-Eyre: I never said that that was absolute nonsense. How are we in this House to know who, in an industry, has a higher income than anybody else? All we are- concerned with is that everybody in an industry should be entitled to a fair return, but if hon. Members opposite try to make out that one section only is entitled to the benefits accruing from an industry, then we must protest. That is all I said.
If I may now come to the question of the Finance Bill under discussion I would say, first of all, that I am very sorry to see that no representative of the Treasury is present. It seems to me that, when we are discussing the Budget, the least we are entitled to expect is that a representative of the Treasury should be present in order to take note of what even the most humble of us on this side may say. We have heard a great deal about bonus issues. The hon. and gallant Member for North Portsmouth and the hon. Member for Wednesbury (Mr. S. N. Evans) touched on the subject. Indeed, the Chancellor of the Exchequer made a fervent speech to those behind him, in which he tried to make out that no new money was involved in bonus issues. To that, there is only one answer—that the only new money in this country at the present moment is that which the Chancellor prints himself. Bonus issues are the inevitable result of trying to follow the policy adopted by the Chancellor. If the Chancellor is sincere in asking industry, at the moment, to put money to reserve, and if he really means that he wants the industrialists of this country to try to reserve their funds for future development, and not to distribute it to shareholders, then such a course of action must inevitably lead to bonus issues. It must inevitably lead to the position where a progressive company, which has put money to reserve, must bring it into conformity with its issued capital. If it has put money to reserve, and has followed the Chancellor's policy, it can only have done it, by contemplating the issue of bonus shares. If any section of the community is asked to forgo the immediate reward which it can earn, and is asked to


use it for the development of the industrial resources of the country, then inevitably, a company must, in order to secure itself with its own shareholders, issue bonus shares. For the Chancellor of the Exchequer to talk, as he did the other day, about new money as though it could be produced by some sleight of hand trick, is merely playing to the gallery behind him, and denying everything for which he has stood at the Despatch Box opposite, and of which he has tried in earnest to convince the country. Bonus shares, far from being evil, are the way in which industry can play its proper part in the conversion from war to peace. I hope that, if the Chancellor does nothing else in the course of the Debate on this Finance Bill, he will have the honesty to recant what he has already said on this subject.

Mr. William Wells: If the hon. and gallant Gentlemen's suggestion is that the Chancellor's case is that all bonus issues are evil, why does he imagine that he should relax restrictions on them in certain cases?

Colonel Crosthwaite-Eyre: The Chancellor has now said that, whereas he considered bonus issues as a mortal sin, he is now willing to compound that sin for xo per cent. Of all the incredible statements from the Government Bench, that seems the most absurd. He is now saying that any bonus issue can be made, provided he is paid 10 per cent. of the profits. If his policy means that, it is wrong and if it means nothing, it is absurd. I leave it to hon. Members opposite to choose which they will have. From the point of view of the industrial development of this country, it means that what is said on the Front Bench opposite is a complete negation of any possibility of industry developing in this country.
I now come to the question of the Profits Tax. This again was presented by the Chancellor as being a fair burden on industry, but he did not say who was to bear the burden. As I understand it, the only people who will be liable to pay this tax will be the ordinary shareholders. Whatever sum is distributable, the debenture and preference shareholders will receive their incomes in full, but the ordinary shareholder will be called upon to pay the Profits Tax before he receives any dividend. If that is so, it will mean that no new money at all will be forthcoming for industry. How can any company

appeal to the public for new money if the whole burden of the Profits Tax is to fall upon them? I hope that the hon. and learned Solicitor-General will bear this point in mind because it seems that, at the moment, he is rapporteur for the Treasury. It seems inconceivable that the Treasury should ask for the expansion of industry, and ask everybody to combine to try to produce exports and develop new enterprises in which we will attract new markets, and, at the same time, make the Profits Tax a penal tax for the ordinary shareholder. The Chancellor must remember that any new money must be subservient to interests already established. It is no use his suggesting that we can induce a new class of share which will not bear the rate of tax now incurred, because those in possession of existing shares are not going to permit other shares to have prior claims to those they hold themselves. Therefore the Profits Tax is simply going to mean a penal levy on the development of industry.
There is one point which I think should be borne in mind. Debenture shares are exempted from the Profits Tax. Under this Bill, they are recognised as something apart from the shareholding of the company, as a bargain between the company and some third person. If that is so why, for example, under the Electricity Bill, are they not so recognised instead of being counted among the general assets of the company? Here again, the Government is trying to get the best of both worlds. So long as that sort of policy is pursued, in one case trying to grab something, and in the other leaving it out, we cannot hope to see any real industrial progress in this country.
There are several very intricate Clauses in this Bill, which I do not attempt to understand, about directors' emoluments and what may be paid by way of superannuation, pensions, and so on. I ask whoever is going to reply to make clear exactly what is the intention of these Clauses. Can a director or other employee look forward any longer to the firm with which he is employed, for a considerable benefit when he retires? As I understand the Clauses, a director or an employee who serves a firm well is penalised, as compared with the director or employee who serves it only moderately well. No allowance is made for service at all. It does not matter whether


a man is the most brilliant servant or the most crassly inefficient. Under this Finance Bill the reward is the same for everyone. Again, this is a penalty against incentive, and no allowance is made for what a man does for the welfare of the community as a whole.
For these reasons I shall vote against this Bill tonight. There is nothing in it to provide the incentive which we all need if we are to give of our best and provide something for the welfare of the community in the years to come. It is a penalty against youth, and a negation of those things which old age has the right to expect. There is nothing in it to commend itself to any section of the community.

6.50 p.m.

Mr. Douglas Jay: I gather that the hon. and gallant Gentleman did not regard as "absolute nonsense" my simple proposition that those who receive wages from the community have, by and large, a smaller income than those who receive profits and interest. It is a fact that, of the total income received by Surtax payers, 70 per cent. comes from sources described as unearned, according to Income Tax definition. That is a simple fact which cannot be denied, and, so long as it is so, I think we are justified in differentiating between the two. It was only because the hon. and gallant Gentleman challenged us on that point that I intervened.
Alter listening to the Debate today, I have the impression that hon. Members opposite find it very hard to make any real criticism of this Budget. The right hon. and gallant Member for Gainsborough (Captain Crookshank) asked how the Chancellor related this Budget to the general economic situation described in the earlier economic Debate. He said that he did not see the connection between the two. That seemed to me to be a remarkable lacuna in the right hon. and gallant Gentleman's mind. Surely, the obvious place of this Budget, in the general policy of the Government, is that it is a counter-inflationary Budget. We all agree that we are living in an inflationary period, and the function of the Budget should be to operate in the contrary direction, and to cut down spending acid income. It is, perhaps, because everybody realises that this is an anti-inflationary Budget, and a

courageous Budget, that there has been so little criticism of it.
I would like to look at one or two points in the Budget from that point of view, and to judge them from the extent to which they will have a counter-inflationary effect. First of all, I think the Chancellor should be congratulated on his refusal to give way to the irresponsible agitation for a drastic reduction in the food subsidies. The right hon. Gentleman the Member for the City of London went so far as to advocate cutting them to "negligible proportions." I believe that the food subsidies are our main defence against inflation today. Any reduction of them to negligible proportions would not merely justify a widespread demand for wage increases, but would, which is perhaps more disturbing, justify a demand for higher old age pensions and a wholesale revision of benefits under the National Insurance Act. If we were really to reduce them to negligible proportions, we should probably have to pass a new National Insurance Act within another 12 months' time.

Mr. Assheton: The non. Member referred to "the hon. Member for the City of London" as having suggested that the food subsidy should be reduced to negligible proportions. I think he is in error.

Mr. Jay: I should have said the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson), who used the phrase "negligible proportions." I think that if we reduced the food subsidies, we should also be committing a breach of faith with the small savers who have had many guarantees from the Government that the value of their savings would be preserved.
Next, I would like to say a word about the Chancellor's cheap money policy. He claimed that his cheap money policy, by keeping down Government expenditure on interest, was acting in a counter-inflationary direction. His critics say that as a result of the creation of the credit necessary to maintain these lower interest rates, he is, in fact, stoking up the inflationary pressure. It is rather hard to say what the truth is between those two arguments. I think the Chancellor can justify his policy up till this spring as having, on balance, been in the national interest. But I myself was rather shocked to discover that there had been an increase in bank deposits of £800 million in 12 months


ending this spring. I would, therefore, say to the Chancellor that I think he should show that restraint in victory which is a higher form of wisdom by taking measures to limit any further tendency of this kind. Up to now the policy has been in the national interest, but I think we have now reached the point where it ought to stop. My advice to the Treasury would be that they should think a little more in future about the volume of bank deposits, and a little less about the rate of interest
From the same point of view, I might say a word about the Profits Tax, particularly as the right hon. Member for Bourne mouth (Mr. Bracken) is here. I regard the Profits Tax as an exceedingly good one. There has been some controversy about its parentage. Some people have ascribed it to Mr. Neville Chamberlain, and some to the right hon. Member for Bournemouth. In fact, it was the child of a temporary but fertile union between the "Financial News" and the "Daily Herald," both of which advocated the National Defence Contribution, which has now become the Profits Tax. That was in June, 1937

Mr. Brendan Bracken: I am sorry to interrupt the hon. Gentleman's history, but actually the "Financial News" was its most virulent critic and was denounced as such by the late Mr. Neville Chamberlain.

Mr. Jay: No, the right hon. Gentleman has not got it right. The "Financial News" was the most virulent critic of the original National Defence Contribution, as was the "Daily Herald," but they both joined in advocating a simpler tax. That marriage, I agree, has been dissolved, but the offspring has lived and thrived. I think this is an excellent tax, first of all because it has the merit of simplicity; it is easy to understand and easy to collect That is why, in my opinion, it is a much better tax than the capital gains tax which was advocated this afternoon. The Profit Tax avoids all those bureaucratic complexities which hon. Members opposite so dislike. By being thus easy to understand and to collect, it has all the advantages which, it seems to me, a capital gains tax would lack. Therefore, I hope that we shall not adopt the capital gains tax; neither would I be in favour of a complication which my hon. Friend the Member for Eton and Slough (Mr. Benn Levy) advocated in an earlier Debate. in the

form of a differentiation between the types of production on which the profits were made. I do not think that would be practicable, if only for the simple reason that so many firms in this country make innumerable different types of products. I also believe the Profits Tax is a good tax because it is not really a tax upon enterprise. It falls on the ordinary shareholder and not on the managing director or the general manager. To that extent, I think, the suggestion that it deters enterprise in any real sense is of very little substance

Mr. I. J. Pitman: I would like to ask a question. It does not fall upon the debenture holder, but on the ordinary shareholder. If that is so, why does the hon. Gentleman maintain that it is not a tax on enterprise? It is the ordinary shareholder who is the enterpriser. and not the debenture holder.

Mr. Jay: I fully agree that it falls on the ordinary shareholder and not on the debenture holder. My, point is that it is not the ordinary shareholder but the managing director, who is largely remunerated by way of salary and expenses, who is really responsible for enterprise.

Mr. Pitman: Surely, enterprise in itself means the launching of capital? A debenture is launched with all the security behind it, and with the ordinary shareholder taking the real risk Surely, that is the enterprise?

Mr. Jay: I do not believe that enterprise, in the real sense of industrial development, is restrained in the minds of managing directors by tax falling on dividends. I fully agree that it is a tax on the ordinary shareholder rather than on the debenture holder. That is why it seems to me that this is a good moment to raise a tax of that kind. The debenture holder is in receipt of a fixed income and, like all recipients of fixed income, he has been losing heavily by the rise in the cost of living during the last few years. Therefore, this is a good moment to raise this tax because prices are high, profits are also rising, and I would point out that the Co-ops are not the only people who are paying dividends, or higher dividends.

Mr. Bracken: The hon. Gentleman may say that the Co-ops are not the only people paying a high dividend, but, as I understand, the Co-ops have made about 900 per cent. profits out of the war.

Mr. Jay: The right hon. Gentleman was not present when the Co-ops were mentioned.

Mr. Bracken: I read the speech.

Mr. Jay: The right hon. Gentleman has not followed the point of my argument. I hope, therefore, for all those reasons, the Chancellor will continue to raise the Profit Tax in inflationary years, and will leave it where it is in deflationary years.
We have also heard a great deal about the bonus share tax this afternoon. I would go so far-with my hon. Friend the Member for Blackley (Mr. Diamond) as to say that I would not have thought this a worse Budget, if the Chancellor had introduced no bonus tax and given us a higher Profits Tax instead. Nevertheless, there is a case for the bonus share tax. In the earlier Debates I made two assertions about the bonus tax and about bonus shares, which I would like to substantiate. The first assertion was that although it is, no doubt, true in theory that a bonus share issue is not a capital payment to the stockholders, nevertheless, in practice the shareholders usually make capital profit out of the whole transaction. The other statement was that bonus shares have been used both for the evasion of Surtax in the past, and also to conceal from workers and customers the profits being made. On that occasion I was accused of lack of candour by the hon. and learned Member for the English Universities (Mr. H. Strauss); and I would therefore like to be very candid today about the case which I then quoted, namely, the British Electric Traction Company.

Mr. Pitman: Will the hon. Gentleman give some figures of cases where the recipients of the bonus shares have made a capital profit out of them?

Mr. Jay: The hon. Gentleman interrupted me before I was able to give any figures, which I will give later. I want, first, to deal with British Electric Traction to illustrate the argument. That company issued a 10 per cent, capital bonus on its deferred ordinary shares every year from 1927 to 1939, with the exception of 1932, when it issued a 100 per cent. capital bonus. It stopped issuing those bonuses in 1939 because the Government put a ban on bonus share issues, and it returned to the more old-fashioned method

of raising its dividend, which now stands at 45 per cent. on the inflated capital.
The result of the whole operation of that company up to now is that the stockholder who in 1927 held shares of a market value of £520 now holds shares, without having put up any new money or done anything else in the matter, of a total market value of £6,250. That is a profit, over the 20 years, of just 1,000 per cent. British Electric Traction is, of course, a company which is making very high profits out of a monopoly position in the transport industry. I have no doubt that this method of issuing bonus shares instead of paying higher dividends was done in order to conceal from the customers and the workers the size of the profits that were being earned. If the dividend which is paid today had been paid on the capital as it stood in 1927, without any increase by share bonuses, it would have been 300 per cent. The directors of the company were evidently not willing because of public opinion, to hand out a dividend of 300 per cent. I am also prepared to maintain that it was a successful method of avoiding Surtax, for the simple reason that if the shareholder preferred to sell some of these shares every year and make a capital profit, he did not have to pay Income Tax or Surtax on it.
It can be ingeniously argued that if the policy of raising dividends had been followed instead of paying capital bonuses, the shares would have risen to the same extent and the capital profit might have been taken. That is an argument which I have heard put by hon. Members opposite. I believe there is a fallacy in that argument. The argument assumes that the company would have been prepared in the case I have given to raise its dividend from the m per cent. paid in 1927 to the 300 per cent. paid today. It is clear that in this instance the directors were not prepared to increase the dividend to that extent because of public opinion. Therefore, it was not in fact, although it may have been in theory, within their power to make an increase in dividend of that kind or to present capital profits to the shareholders by that method. If that was not so, it follows that the argument is valid that Surtax was successfully evaded by this method. That is only one instance.
The other point on which the hon. Member for Bath (Mr. Pitman) asked for


figures the extent to which capital profits had been made. I have examined a good number of these transactions which have occurred since the war. These are cases of companies which have been given leave by the Capital Issues Committee to make bonus issues and in which new money has actually been put up. The interesting thing is that if one takes the market value of the shareholding before the operation, and if one deducts the new money that has been put up, and takes the total market value of the holding after the operation, one month later, one finds that in practically every case a capital profit has been made. If the hon. Member is interested in the figures, I can quote one or two companies. In the case of Leyland Motors, one month later, there was a capital profit of 6.5 per cent., and in the case of Express Dairies, a capital profit of 16.4 per cent.

Mr. Drayson: Will not the hon. Gentleman agree that if the receivers of those bonus shares had actually sold them at the time, that negligible profit of 5 per cent. would have disappeared owing to the larger number of shares coming on to the market? Is it not because they do not sell the shares that the price is maintained?

Mr. Jay: In the first place, a capital profit in one month ranging from 6 per cent. to 16 per cent. is not negligible. The point raised by the hon. Member is irrelevant. The argument I am making is that, in the great majority of these cases, a capital profit in the normal sense is made. The fact that it might not be made if the shares were sold at once is not relevant.

Mr. Pitman: The hon. Gentleman has not answered the question I put to him a few moments ago as to whether profits were being made. A person does not make a profit until he sells the shares. The hon. Gentleman's first statement was that in his experience shares were sold, but in my experience it is the opposite—the shareholder continues to hold the bonus shares as well as the original shares.

Mr. Jay: I was putting forward the simple proposition that the total market value of the shareholder's holding of shares is worth more after the operation than at the beginning of it. If one takes three months or six months, the shares

show, in practically every case, an even higher profit. Therefore, I maintain that experience during the last 12 months substantiates the statement that capital profits are normally made by share issues. The hon. Member for Stockport (Sir A. Gridley) agreed with that earlier today, and said quite clearly that in practice profits of that kind were normally made.

Mr. Drayson: Does not the hon. Gentleman agree that if a company, instead of issuing bonus shares and utilising the profits to enlarge its business, had increased the dividend, it would have added six or seven per cent. increase of capital, because the shares would have gone up owing to the dividend being increased?

Mr. Jay: Perhaps the hon. Member did not listen to the earlier part of my remarks about British Electric Traction. I made the point that that argument is not valid because in many cases the companies are not willing to face the effect on public opinion of raising their dividends. I am doing no more now than substantiating the two simple points, first, that in the great majority of cases capital profits are made by this method, and secondly, they are a method of concealing profits and in many cases of evading Surtax. I think those two arguments can be put forward in support of the Chancellor's proposal.
There is one other thing I would like to say, on the quite distinct subject of the expenditure side of the Budget. We have to recognise that the really unbalancing and unwieldy item in the Budget, and also, in the balance of payments, is the figure of Government expenditure overseas. In the calendar year 1946, out of a total deficit on our overseas payments of £400 million, no less than £300 million consisted of Government expenditure abroad. The remarkable fact is that, without Government expenditure, the deficit on our balance of payments in 1946 was actually no higher than in 1938. This year it is estimated that Government expenditure overseas at £175 million will be equal to half of the whole deficit on the balance of payments. I ask the Government to look very seriously at this item. We all know that much the largest single part of the £175 million consists of expenditure in Germany. I think it is correct to say that of that £175 million, the cost of the British


zone in Germany accounts for about go million which falls on our Budget and also on our balance of payments. About £50 million is represented by dollar expenditure mainly on food in Germany, and is really the unbalancing item both on the Budget and on the balance of payments. Since most methods have been tried for solving this problem in the last 18 months, I would conclude by suggesting to the Government that they should seriously consider pointing out these facts to the Government of the United States, and making it clear that there is a time limit beyond which we cannot possibly go on bearing this burden. I would not suggest that we should seek relief from the Budget side of this burden, but merely from the foreign exchange cost. The proposition that we should put to the United States—and I think this represents the moral and the economical realities of the situation—is that they should, from some such date as perhaps the end of this year, undertake the whole foreign exchange burden of the Anglo-American zones of Germany. If that were done, it would bring both our Budget situation and the balance of payment situation into reasonably manageable compass. It it is not done, I confess that I do not see how we shall be able to carry on the occupation of Germany.

7.22 p.m.

Mr. Spearman: Hon. Members opposite are living in a fool's paradise if they think that we have not the most definite and the clearest reasons for criticising this Finance Bill. My complaint is that at a time of extreme gravity it has failed, in my opinion, for reasons which I am going to try and show, as an instrument of economic planning. I know that hon. Members opposite were accustomed, perhaps more so before the Election than now, and before their plans were tried than afterwards, to arrogate to themselves the exclusive use of the term "planners." It depends upon the meaning put upon this word. If planning is an attempt at interference by a topheavy bureaucracy from the centre to give detailed decisions that could be better made by men on the spot, then we do not claim on this side of the House to be planners. If the word means what I contend it should mean, a co-ordinated policy for using the resources

of the country so as to achieve a well-thought-out objective, that is surely what Governments are for. I can see no point in a Government that will hot do planning of that sort.
I have referred to the gravity of the present situation. The Chancellor of the Exchequer is carrying many burdens. If he is kept awake at night by any of them—and I am not suggesting that he is—it probably is by the problem, so often referred to today, of the balance of payments.

The Chancellor of the Exchequer (Mr. Dalton): That is much the most important of them.

Mr. Spearman: I am very glad to hear that. Some of us have thought that the Chancellor took too much comfort from the fact that that problem is still a year or so off. I would like him to lose the complacency of which some of us accuse him, and to get down to that problem now. All of us here realise how grave the situation is. I think that our expenditure abroad last year was something in the nature of £1,500 million. What we earned by our own exertions was about boo million, and that was roughly the amount of our exports. The gap of £600 million is being met by drawing upon the American loan. It means that more than one-third of what we are now spending abroad comes from the American loan and is obviously not going to last us very long. I do not believe that the people of this country sufficiently realise that fact. Generally speaking, they are expecting better times. They think there will be more to buy in the shops. It should be made plain to them that the very reverse will be the case. In actual fact the loan will soon be exhausted, and unless another is arranged and things improve very much, people will be called upon to make great sacrifices.
The Chancellor of the Exchequer demanded sacrifices from the people of this country, I am bound to say I think rightly, by the new Tobacco Duty. It was aimed at saving dollars worth £7½million or thereabouts. Unless we succeed in reducing the present gap by more than 50 per cent., from more than £600 million to £300 million, the Chancellor of the Exchequer will have to call upon the people of this country for 40 times as great a sacrifice as he called for in his Budget


by the tax upon tobacco, which was a very small part of what the people will have to bear in the future. There are two Governments who can put off the evil day: the Government of the United States, by granting us another loan, and the Government of this country by so planning our affairs and our resources that we are able to stand on our own legs. Obviously, we would all, for our self-respect and stability, prefer to depend upon our own Government to get us on our legs again.
I believe that the causes of the present situation, which has deteriorated so markedly in the last 18 months, are primarily three. The first is our exhaustion owing to the war. Clearly, that is not the responsibility of the Chancellor of the Exchequer and now is not the occasion to speak about it. The second is the failure to produce the fuel necessary. It caused the economic crisis last winter, but there again, although I believe the crisis was avoidable, it was not within the province of the Chancellor of the Exchequer, except as a Member of the Government. Therefore, there is no occasion to say more about it now. The third reason, which is entirely within the Chancellor's responsibility—and that is why we ought to discuss it now—is the distortion of the spending of the people, owing to the financial policy of the Government.
The hon. Member for Wednesbury (Mr. S. N. Evans), who spoke from the opposite side of the House, appeared to think that a factor which was causing us so much anxiety was the increase in the distribution of dividends. I think he was confusing cause and effect. Without in any way advocating an increase of dividends, I suggest to him that any increase in the distribution of dividends was an effect of inflation and not a major cause of it at all.

Mr. Stokes: In the absence of my hon. Friend to whose argument the hon. Gentleman opposite is alluding, I would point out that what he sought to show was that the disproporionate increase of dividends at the present time set a very bad example.

Mr. Spearman: I understood the hon. Member to say that it was a major cause of the present situation. If I am wrong, I withdraw what I said. I believe that

under the present financial policy we have a position where, to use a current phrase, there is too much money chasing too few things. The result of that is that all sorts of things are being bought by people who do not really want them but are buying them because nothing else is available. That means that men are directed to the wrong industries. Secondly, and for the same reason, I believe there is an acute shortage of raw materials, which means that many factories are working only part time and that there is a huge, concealed unemployment in this country.
I should like to give four brief examples of the failure of the financial policy of the Government as I understand it. First, take the electrical industry. A greatly increased number of men are engaged in the manufacture of electrical equipment over the prewar years, although there is not the power to use them. Secondly, there is the iron foundry industry which is of great importance to the building programme. There are 12 per cent. fewer workers in that industry than there were before the war, while there are 60 per cent. more workers than before the war in the machine tool trade where we have a vast accumulation of machine tools as a result of the manufacture of those tools during the war. Third, there has been a great contraction in the consumption industries and an expansion in the industries making capital equipment. That has been quite unco-ordinated with the amount of raw material available. Consequently, we have again concealed unemployment and wasteful distribution of manpower. The fourth example is the question of exports. We have a greatly increased number of men making capital machinery over those making consumption goods. Capital machinery is only bought by the soft currency countries, and it is not available for America or for Canada from whom we want the dollar. If we were making woollen goods or other consumption goods then we would be able to secure with them dollars that are so vital and necessary.
It would seem to be in each of the four instances a matter of bad planning by the Government. I suggest there are two Ministers who could put this matter right. One is the Minister of Labour, who could do it by having a wages policy and by directing men to where they were


required That would be of an authoritarian nature and would not be an acceptable scheme for us on this side. and it would be out of Order to discuss it in today's Debate. Therefore, I will come to the second Minister who can cure this matter, and that, I suggest, is the Chancellor of the Exchequer, who can do so by having a different financial policy and by cutting down inflation to an extent not yet seriously contemplated. The Financial Secretary to the Treasury kept referring to the Budget surplus until it had become almost a parrot cry with him. I do not want to hurt the Financial Secretary by comparing him to a parrot, but he continually said: "We have got this Budget surplus." The point is not whether we have what might be a spurious surplus but whether it will achieve the object in view. After all, the proof of the pudding is in the eating. Have we got the demand for goods down to the amount available?
At the present time we are spending more than before the war on defence, on the Civil Service, on the social services, on education and on the equipment of our factories. Where is all that coming from? They are admirable things on which to spend money, but how does it add up? Our total resources and our total needs must automatically balance. Are we going to do it by design, or is it just going to be a matter of chance, in which case the most vital needs must suffer? I should like to ask the Chancellor whether he could not see his way to give us a balance sheet of total expenditure by the Government, by consumers, and by capitalists on machinery, and also an estimate of the resources available so that we should know what was the Government's plan and if they were so arranging it as to give the right priority or the priority we thought right to the various objectives? Then we should have some idea whether there was a real planning mechanism between the different Government Departments, or whether we were simply drifting into chaos with each Department who shouted louder than the other getting its way.

7.35 P.m.

Mr. M. Philips Price: It does not seem to me that during this Debate there has been any really effective criticism from the Opposition benches

of the Chancellor of the Exchequer's financial policy. It is true that the right hon. and gallant Member for Gainsborough (Captain Crookshank), who led off for the Opposition, criticised him for not having been as good as his word and for failing to reduce expenditure. He quoted speeches which my right hon. Friend had formerly made, and said that in this Budget he did not seem to have carried out those admirable sentiments. However, it seems to me that the Chancellor did succeed in saving a very large sum of money, £290 million from the spending Departments during the last financial year, which suggests to me that the watchdogs of the Treasury must have been on their hind legs in seeing that financial waste was avoided and that everything which could be saved by the spending Departments has been saved.
This Budget and the Financial Statement upon which it is based are surely hampered in regard to the possibility of reducing expenditure not so much by the home situation as by the general world situation. The inflation that has been going on abroad, as the Chancellor has shown us quite well, has increased the subsidies we have had to pay on food and raw materials; and prices for our soldiers overseas have gone up owing to the inflation in Egypt, India and elsewhere. All that is, of course, tied up with a foreign policy which would not be in Order to discuss here, but they are all things for which I do not think it is reasonable to blame either the Government or the Chancellor of the Exchequer. All well informed observers know that the world economic situation today is an inflationary one and that the problems of dealing with our balance of payment on trade and our dollar resources are of most lively concern to every Chancellor of the Exchequer. The maintenance of price control and of rationing are part of the machinery by which we insure ourselves against the risks of this world inflation.
In this Finance Bill there is another instrument, namely, direct taxation; and the high level of taxation generally is an important way of counteracting these world inflationary tendencies The world today is roughly divided into countries whose financial policies are more or less opposite. In a large part of the Near and Middle East, Southern Asia and parts of Africa there is an inflationary situation


where there are no controls, where prices are going up and where there is very little direct taxation.
It is much the same on the American continent, where there is no control of prices by the administration and taxes once heavy are being reduced In the other part of the world behind the iron curtain—the Slav Communist world—everything is very much controlled, although they also have free markets running side by side with price control and rationing. To some extent we are even more rigidly controlled here as regards price control and rationing than they are in Russia, and by all these methods we are trying to insulate ourselves against what is going on in the outer world. There is this dangerous situation In the inflationary world there is plenty badly distributed; in the controlled world, on the other hand, we have an unbalanced situation where there is large purchasing power but no means of satisfying it. The only way out is that the United States should lend from its plenty to the rest of the world, in the form either of loans or relief. Otherwise, there is bound to be a slump over there and a continuation of starvation in Europe.
This may be a digression, but my point is that in view of the world situation this is the only kind of Finance Bill and Budget which any Chancellor of the Exchequer here can introduce into this House, because there is a fundamental world inflationary situation which is likely to continue. Young countries in the Near and Middle East and in Asia which have recently sprung into national consciousness are striving to cease to be purely raw material producers and to become industrialised. They are seeking to establish industries, stop soil erosion—which is a very serious problem—introduce public works, afforestation, irrigation, electricity, power schemes and so on. If that is so, the only thing for this country to do is to try to assist them—although I know we are in a difficult position ourselves—and to try to induce the United States to give of its plenty to these young nations, since this unbalanced situation is hound to continue and we in turn are likely to suffer increasingly from the dangers of inflation.
The White Paper on the national income and expenditure of the United Kingdom shows very many interesting things.

Among them is the fact that the national income has not gone down. It shows, also, that our consumption is extremely unbalanced. The figures are almost staggering, and when the national income and the amounts of services and actual consumption are examined they are found to be roughly the same this year as in 1938. It looks almost as if the standard of living has gone up slightly, but the point to remember is that we have now a much more equal distribution of the national income. The Budgets of recent years, in common with the present Budget, have seen to it that there is a much better and more equitable distribution of the national income—a fairer division of the cake, as it were—than there has ever been before. That enables the mass of working and middle-class people to maintain their expenditure on what there is. Unfortunately, other figures which appear in Table 26 tell a rather different tale. There is found an analysis of the way in which the consumption of the country is going, showing the amount of goods being consumed and the services being bought by the people. An entirely different position is shown.
The hon. Member for Scarborough and Whitby (Mr. Spearman) used the phrase "unbalanced economy," and that is just what these figures show. They show that we are buying less food and fewer clothes, but that we are consuming very much greater quantities of alcoholic liquors, reading more books, enjoying more entertainment, mainly no doubt, by way of films—

Sir W. Darling: And reading your speeches.

Mr. Price: —and smoking very much more tobacco. But the consumption of more alcohol does not affect our international position with regard to dollar resources. What is shown is that if people are prevented from buying clothes and from getting more food they will spend in other directions. In some respects these other directions are not so desirable, at least in so far as they make it more difficult to deal with our balance of payments and our dollar resources. No doubt, that is the reason why the Chancellor has taken such drastic action over the Tobacco Duty, and I think he is undoubtedly right. As many hon. Members of this House have pointed out in recent months, a very big drain on our


dollar resources is caused by the purchase of American tobacco.
The Chancellor has gone along the lines of a heavy increase in the tax on tobacco and public exhortations to smoke less. I wonder if he will succeed. I hope he will, but a heavy tax does not always reduce expenditure. In recent years the tax on tobacco has been going up, but consumption has not been reduced in the least. I fear that even now the public will tend to slip back into its old ways although, as I say, I hope the Chancellor will succeed. I hope, too, that the right hon. Gentleman will try to make the tax a little easier for the old people to bear, and we look forward to some statement from him in this respect. I know that whether he can do anything in this connection is largely a question of administration and of finding the right technical method, but we shall all be disappointed if, when he replies this evening, he is unable to give us some idea of the results of his cogitations on this matter since he last addressed the House.
I think it may be necessary for the Chancellor to adopt more drastic measures still in dealing with our dollar expenditure if what he proposes in this Bill does not have the desired effect. It is my belief that the Chancellor may have to undertake quantitative reductions in imports of tobacco from dollar sources. Unfortunately, we are tied down by Clause 9 of the American Loan Agreement, which makes it difficult to reduce American imports of tobacco without reducing at the same time imports of tobacco from other countries. As I pointed out on a former occasion, there are several sources open to us of obtaining tobacco from non-dollar areas which could be used to help the Chancellor in his difficulty. It is desirable that we should seek to be relieved from this obligation under Clause 9 as soon as possible, because it will hamper us in dealing with our overseas payments and conserving dollar resources.
This is an austerity Budget, as it must be in view of the world situation. We are trying to insulate ourselves against the inflationary situation outside. That situation may intensify if the United States adopt the policy of lending to undeveloped and devastated countries. We cannot tell what America will do but providing she does adopt this policy, we

shall continue to have inflation throughout the world, and for many years this kind of austerity Budget will be the rule rather than the exception. It is the only thing which can be done by the Chancellor in the present situation.

7.52 p.m.

Mr. Lipson: Some of what my hon. Friend the Member for the Forest of Dean (Mr. Philips Price) has said is a matter of controversy, but there is one thing which will receive assent from all parts of the House, and that is the hope expressed by him that the Chancellor has some good news to tell us tonight in regard to a concession to old age pensioners in the matter of Tobacco Duty. I go further than hope for a concession, because I expect the Chancellor to make an announcement. I am fortified in that expectation because if the reply had been negative, it would probably have been left to the Financial Secretary to make it. I assume that it is to be good news, because it is a characteristic of the Chancellor that he is always the one to announce the good news. We have been told by the right hon. and gallant Gentleman the Member for Gainsborough (Captain Crookshank) that the Opposition intend to divide against this Bill, and, as an independent Member, I have to make up my mind what I shall do From the speeches of Government supporters, it is clear that over this Bill there is no split in the Government ranks. It is equally clear that the Opposition are united against the Bill.

Mr. William Wells: I do not think the hon. Member could have heard the speech made by the hon. Member for East Ealing (Sir F. Sanderson).

Mr. Lipson: I shall be very surprised if the hon. Member for East Ealing votes for the Finance Bill tonight. I listened very carefully to the right hon. and gallant Gentleman the Member for Gainsborough to find out exactly what objections he had to this Bill, and what were his alternatives. He told us that one of the principal objections was that Government expenditure was too high. I agree with him on that, but Government expenditure always has been and always will be too high for the individual taxpayer. What we have to decide is whether the amount of expenditure proposed by the Budget and embodied in this Bill, is higher than it ought to be as a result of


Government action. The right hon. and gallant Gentleman thought that it was, and instanced the considerable savings which might be found in a reduction of the food subsidies. It is true that the amount to be paid in food subsidies this year is likely to be over £400 million, which is a very considerable sum, but I cannot understand the argument, which is sometimes put forward, that these subsidies have an inflationary tendency. I am aware that some of the criticisms in regard to the amounts we pay for food are against the policy of bulk purchasing. I support that policy, and in any case do not think it makes any appreciable difference one way or the other to the amount the Government have to pay in food subsidies. The real reasons for the very great increase in the food subsidies is the inflationary tendency in the countries in which we have to buy the food where price control has been removed, but for that the Government cannot be held responsible. This Government did not invent the food subsidies, but found them in existence. They have grown to a very large extent during the lifetime of this Government, but I do riot consider that they can honestly be held responsible for this.
I urge the Chancellor not to be stampeded by the criticism which is made in regard to the amount of these food subsidies into departing from this policy. I believe that they have been of great benefit to the nation as a whole. There would be a great many people who would be very seriously affected by the increase in the cost of living as a result of any reduction in these subsidies. Schoolmasters, parsons, retired civil servants and retired officers from the Services in my constituency would all suffer from any reduction in the amount. We are told that the food subsidies for a man, wife and two children are equivalent to something like 14s. a week. The great majority of people living on fixed incomes could not possibly find out of income the extra amount necessary, without the food subsidies. Another advantage of these subsidies is that they have tended to keep wage increases much steadier than would otherwise have been the case. What we have to decide is whether, in spite of their great cost, the food subsidies are not saving the country today more than they are actually costing. If there were considerable increases in wages and salaries as a result of a reduction in these subsidies, the costs of pro-

duction would go up tremendously. That would have a serious effect on our export trade, and would be detrimental to the national interest.
Another means of saving, which was suggested, was in the reduction of the number of civil servants. That number must depend, to a large extent, on Government policy, and, to a certain extent, on matters which are outside the control of the Government. For instance, we have been told by the Minister of Food that there is a reasonable prospect that when the result of the harvest is known he may be able to abolish bread rationing. If bread rationing could be abolished that would mean a considerable reduction in the number of civil servants employed for that purpose. That is true of some other controls that can be taken off when conditions make it possible. It is clear, however, that any real saving in the number of civil servants would not be so much a financial saving as a manpower saving, because they would be available for other purposes. But any real hope of a reduction of our Budget to what we would consider to be normal must be in an improvement in the international situation. With the objective which the Foreign Secretary is pursuing everybody is agreed, and a large section of the population agree on his method, and it is in that that any real hope of saving must lie. We should be doing a great disservice to this country, and to the world generally, if we were to adopt a policy, as has sometimes been suggested, of cutting down our defence or foreign commitments to the extent that has been proposed in some quarters. I believe this country to be a steadying influence in the world, and that it is necessary for us to maintain our influence, as we are doing, although the cost is great for the time being. If we can succeed in our policy of securing a stable and peaceful world, it will bring forth very good dividends and will be worth the sacrifice that has to be made for the time being. I repeat that I cannot see any reasonable hope of a great reduction in our expenditure overseas until the international situation is very much easier.
That is equally true about our expenditure in Germany. I agree that it would be helpful if America would adopt the policy suggested by the hon. Member for North Battersea (Mr. Jay), and accept our liabilities, so far as foreign exchange


is concerned, in Germany. If that is not possible I think the right thing to do is to regard our expenditure, heavy and burdensome though it be, as something by way of insurance. Ultimately, we hope—and we trust it will be soon—that Germany will be able to work out her economic salvation. That will take time, and until then we must be prepared to accept this heavy responsibility. But when we have a Budget of this dimension we have the right to ask the Chancellor to see that he is taking all possible steps to ensure that the country gets value for the money we are spending, and that there is no unnecessary waste. During the war, we had a Select Committee on National Expenditure which, I believe, served a useful purpose. This Government decided not to re-appoint that Committee, but to replace it by an Estimates Committee. I would like to know from the Chancellor whether, in his view, that Estimates Committee is fulfilling the functions which the Committee on National Expenditure used to perform and, if not, whether the Government will reconsider that matter? Unless the Chancellor can assure the country that he is taking all reasonable precautions to see that there is no waste, and unnecessary expenditure, there will be all this talk of too many civil servants and unnecessary waste, which does a great deal of harm, not only to the Government, but to the national interest as a whole, because it creates the wrong kind of spirit.
We all hope that our economic troubles will be solved by an increase in production. For that we have to look to the policy being pursued by the Minister of Fuel and Power. If he can persuade the miners to produce enough coal—and I think it looks as if he may succeed—I believe that our production drive will be a great success. It is not very much use going to the workers and telling them to go all out to produce more when, at present, there are many factories working only part-time. They feel that if they use up all the coal there is they may have to return to what they suffered last winter.
There is one more point I would like to mention, which is causing some concern in my constituency and, no doubt, in other parts of the country. I support what the Government propose to do in Clauses 15, 16 and 17 to deal with the growing abuse by companies and directors in being

able to evade proper payment of taxation through retiring gratuity schemes. It is the practice, however, in a large number of independent schools, and, probably, in other institutions as well, for masters retiring on pension to be paid a lump sum. The master pays a percentage of his salary each year towards his pension fund, and the governors of the school pay a percentage, and when he retires he receives a lump sum. Some of these masters have heard about retiring pensions being taxed under this Bill, and have been rather disturbed. I understand that something appeared in a Sunday newspaper yesterday, which causes much concern. I was telephoned and asked about it, and I hope the Chancellor will say that it is not the intention of the Government that these people, who are perfectly honest, and who have no desire to evade their obligations, should be affected by these Clauses. I hope he will say that these retiring gratuities will be theirs without reduction of any kind.
Now I come back to my original question; How am Ito vote on this Bill? I see that the Chancellor has just come in. and he will be able to hear my answer. After hearing all the alternatives put forward by the Opposition, I am not satisfied that if they were in power they would' have produced a Finance Bill which would have better served the national interest than the one which is before us today. This Finance Bill is hard, it is austere, but it is one which in my opinion meets the times. If the Chancellor of the Exchequer would only bear in mind the friendly criticism which has been given to him, perhaps he will be able next year to bring in a Budget somewhat less austere, and we shall all be glad. In the Division Lobby tonight, I shall support the Bill.

8.10 p.m.

Mr. Mellish: I welcome the speech made by the hon. Member for Cheltenham (Mr. Lipson) as a refreshing change to many of the speeches from the other side of the House, which have dealt with stocks, shares, debentures and money generally. Almost every speech which has been made since 3·30—and I have been here all the time—has been connected with stocks and shares. I know nothing about manipulations on the Stock Exchange, and I am rather glad that I do not. Experts on our own side, including the hon. Member for North Battersea (Mr. Jay), have been able to put


up totally different arguments to those of the experts on the other side, and it would appear that the Stock Exchange is a most confusing and difficult way of operating money.
The reason why I have intervened in this Debate is because I am one of those who listened to the Chancellor's Budget speech, and I noticed with a great deal of interest that, for nearly three hours, the Opposition were rather quiet and appeared rather amazed at the statements coming from the Chancellor, and the only time they cheered very heartily was when the Chancellor announced that there was to be an increased tax on tobacco. Those hon. Members who were in the House will remember the cheers that went up from the opposite side. I was one of those who was very shocked. My immediate reaction was that this was a tax which would affect our people. [HON. MEMBERS: "Whose people?"] I decided that the time was opportune to address a series of meetings within my own constituency and in the immediate area, and I can say that I come here tonight with information which expresses the feelings of the people who, in my humble opinion, really count—the people who are paying this tax. At those meetings I addressed approximately 2,000 people. They live in a very poor working class district, and a vast number of them, as a result of the Chancellor's recent Budget, will be relieved entirely of paying any Income Tax, but, by and large, every one of them has been affected by the Tobacco Duty.
I expected to find a great deal of criticism. I found that in the main those people, who are the ordinary people of this country, were politically conscious. I think that one of the reasons for the failure of the Conservative Party—and I think that it will be the reason for their continued failure—is that they have not realised that the people today are awake, mentally alert and politically conscious. Times have changed since Mr. George Bernard Shaw wrote, "There is no such thing as public opinion." That may have been true then, but people now read for themselves and form their own opinions. It is a fact to say that they accept the Tobacco Duty as being a wise way in which to save dollars for food. They understand why this tax is being imposed. There were cheers from the Opposition when the Chancellor announced

the tax, but the Opposition will once again find that the people generally understand the reason for that tax.
The Financial Secretary said that the Chancellor intended to make a reference to old age pensioners. The hon. Member for Cheltenham said, in your absence, that it must be good news, because you always keep good news to yourself. I do not know whether that is true, but I hope that it is good news—

Mr. Deputy-Speaker (Mr. Hubert Beaumont): I do not keep good news to myself, and I do not make statements.

Mr. Mellish: I was pointing out to the Chancellor that there are hundreds of thousands of people in this country who are badly affected by this tax—disabled people, those suffering from tuberculosis, and the blind. I do not know whether I am in time to do anything for those people before the Chancellor's statement tonight, but I would like him to recognise that they have been badly hit by this tax, and to tell him that if anything can be done for them, it will be greatly appreciated. I think that there is a better case for those people than for the old age pensioners.
There is one criticism of the Budget which I have to make; that is the re-imposition of the Purchase Tax on essential electrical appliances. I recognise that this is something which might be dealt with on the Committee stage, and I believe that there is an Amendment down, but I hope that by emphasising this now, it may sway the Chancellor a little into reconsidering the tax on electric cookers, washboilers and heaters in relation to the Government's housing programme. The borough which I represent had an outstanding housing record before the war—a record which has slowed down now because there are so many other boroughs in competition—and they introduced these appliances into their houses and flats. This increased purchase price must affect the cost of building, which, in turn, will be reflected in higher rents. The alternative is that the housing authorities may be tempted not to equip their houses with such appliances, and the result will be that the tenants, the majority of whom are in the lower wage groups, will be forced to buy these articles at prices well beyond what they can afford.
I think that the Purchase Tax on these three items should be looked at again by the Chancellor. I would point out that the fact that the Chancellor does not wish people to use electricity too much does not weigh in this case, because they will have to have some other form of heating in their homes, and if they cannot buy these appliances they will try other methods. I would emphasise to the Chancellor the importance of this matter. The people at the meetings which I addressed are the people for whom I speak. They entirely endorsed the remarks which were made by the Chancellor in his Budget speech, and I am directed by them, and not by any stockholders or shareholders, to go into the Lobby tonight and vote for this Bill.

8.19 p.m.

Mr. I. J. Pitman: The hon. Member for Rotherhithe (Mr. Mellish) gave a most interesting and sincere speech. I hope however that he will realise that we on our side are equally sincere. We stand just as much for the working man in our constituencies as hon. Members opposite. By and large, I am just as interested in the Budget as it affects the welfare of the nation as a whole as any hon. Member opposite, and that solicitude for all and any class applies equally to hon. Members behind me. So far as we are concerned, we, unfortunately, seem always being put in the position of being "suckers" in having to oppose some item of public policy in which there is something wrong in principle and in which our opposition can be depicted as support for the so-called moneyed class. I assure you, Mr. Deputy Speaker, that I do not care a "tinker's cuss," or whatever the fashionable phrase may be at the moment, in this question of bonus shares so far as it affects a particular class as to whether they get bonus shares or carry on without them. What I do however attach importance to is the question of principle and the fact that His Majesty's Government, and particularly that part of His Majesty's Government, the Chancellor, who is at present apparently leaving the House, should do something which is so clearly unintelligent, and wrong.
The hon. and gallant Member for North Portsmouth (Major Bruce) read an extract from a book published by the firm

whose name I carry. I should like him and other hon. Members to realise that it is the proud boast of all publishers that they do not censor the books put up to them for publication. I have no doubt that patient research would show that some of our authors have even said some good things about the Socialist Party. I hope hon. Members will not necessarily accuse me of sharing that dim view. Anyhow the view which was expressed in the extract read by the hon. Member was that one of the expediences for a bonus issue was the idea that it could be used to deceive workpeople. That allegation, of course, is not new and is not confined to that author. Moreover it really will not run. For instance, in Standing Committee on the Borrowing (Control and Guarantees) Act we had a very interesting time on this bonus issue question. The Financial Secretary said:
Everybody knows that in the past these bonus shares have been issued to camouflage the real dividend that has been paid, which in turn has been used to depress wages.
Then again, the learned Solicitor-General said:
… issues of bonus shares can be used … as a method of disguising on a large scale the rate of profit earned on the capital assets of any company"—
"assets of" be it noted, not "issued by." The hon. Member for South Nottingham (Mr. Norman Smith) gave us a very nice little example. He told us:
Odhams Properties' 5s. units shares stand at something like 13s. … Odhams Press Ordinary 4s. shares stand at something like 16s. People who work for these firms hold what are known in the newspaper business as chapel meetings, which are trade union meetings. They are part of the trade union organisation applied to the black-coated and, comparatively, highly-paid workers. At their chapel meeting they may say something like this: 'Odhams Press 4s. Ordinary shares are now quoted at 16s. Odhams Press Ordinary shares are paying 12 per cent., while 3 per cent. is the accepted yield of gilt-edged securities. The shareholders are getting four times what they might have expected. What about our getting something of that?'"—[OFFICIAL REPORT, Standing Committee E, 28th February, 1946; C. 2281–2, 2305–6, 2293–4.]
This idea that shareholders and work people are deceived by the rate of interest on shares just will not work, because of one of two things. Either the work people and their leaders are so inefficient and unintelligent that they cannot appreciate the mechanism of a bonus share and are deceived by it; or, alternatively, if they are really so stupid then the simple


device of declaring a dividend at so much per share would deceive them even more completely.
The trouble is that hon. Members opposite do not know what they are talking about on this bonus issue question. During that Standing Committee to which I have referred we had the learned Solicitor-General being less learned than usual and saying it was a question of deception about the rate of interest on assets as distinct from the rate on capital issued. The whole point is that capital issued is in these cases so very different from capital assets and that nobody grudges a fair dividend on the assets employed, even if the assets are more than the capital originally issued. The point is that the declaration is on the original capital of the company, which is not increased as the profits are saved and ploughed back year after year, whereas the effective dividend should be regarded as proportionate, not to the original capital, but to the assets employed. Hon. Members opposite do not understand what they are talking about. The hon. Member for North Battersea (Mr. Jay) made a most confusing speech. He kept talking about the bonuses "paid." I listened very carefully, and after a long time I found he was not referring to bonuses "paid" at all, but to bonuses "issued." If hon. Members opposite confuse their case by not understanding the terms used, and by using them in a misleading way, how on earth can we on this side understand them. No wonder that, with such poor understanding of what is involved, the proposal is wrong and the arguments bad. We do not care a tinker's cuss about the tax itself, except that being wrong and being unintelligent it is our duty to oppose it as a matter of principle and of intelligence.
There is one point of omission in this Budget to which I should like to refer in the short time left to me. The Chancellor ought to have taken the opportunity. in affecting a reduction in taxation, to clear up the mess into which the Income Tax laws have got. He had a really great opportunity, when lowering taxation, to do something in this direction. The late Sir Kingsley Wood consulted me as a wage payer at the time of the introduction of P.A.Y.E., and it was quite clear to me in the discussions which went on that he envisaged that, if and when there was a possibility of a

reduction of taxes, the opportunity should be taken to simplify the tax system of this country. What we are now doing is having 52, and sometimes 53, recalculations of an annual calculation for weekly wage earners. The whole of our Income Tax laws are based on the fact that when Income Tax was first introduced it was intended for a primarily agricultural aristrocracy, where the Income Tax was levied on people of considerable means who drew it ultimately from annual harvests. The whole situation has however now entirely changed.
The national income has been redistributed. Hon. Members on this side of the House—and I should like the hon. Member for Rotherhithe to read this tomorrow are extremely glad that our policy has been so successful in having brought about the wage increases which appear as such overwhelming figures in the returns of the national income. But that redistribution of wealth has meant P.A.Y.E. and a vast amount of work, money, manpower and material both in factories and in the offices of the Inland Revenue. The recent report of the Select Committee has shown that there are tremendous arrears of work in the Inland Revenue. The Income Tax Acts are in fact not being properly carried out and cannot be. These 52 weekly recalculations of an annual calculation for so many more million taxpayers have bogged down the taxation system of this country, and I strongly urge the Chancellor not to miss another opportunity to review and revise. Opportunities of this kind are necessarily only very rare. There are indeed not many opportunities for lowering taxation on a large scale, as it has been lowered this year. He has been very pedestrian and entirely lacking in imagination and constructiveness in failing to take his great opportunity, and in merely going back to what used to be some time ago. It is always dull and stupid to go back and more so when the conditions of the present are radically different from those: of the past.
Let me end on a practical note and suggest to the Chancellor that he asks the hon. Member for South Cardiff (Mr. Callaghan) and the hon. Member for the Spen Valley (Mr. G. Sharp), who was Chairman of that Select Committee—and I would offer myself—to help him constructively in the working out of some new system which would save a great deal of


manpower and improve the system generally. It seems to me to be so clear that the Chairman of the Board of Inland Revenue is rather like me in my shorthand capacity. When a new shorthand system comes along I always imagine I have seen it and many like it before. Every time anybody says to the Chairman of the Board, "Let us reform our Income Tax laws," he is bound to adopt the attitude that it's just another wild cat scheme that he must spend time in killing. I think it would be most reprehensible for the Chancellor to fail to make the effort, which can be made only when taxation is falling considerably, say either next year or possibly the year after. Let him now reform the Income Tax laws so that they accord to the real situation, which is the collection of money from weekly wage earners and not annually from farmers. I, at any rate, have several ideas on this point. I believe others have ideas, too, and if I can help I, like any of the others, will be glad to do so to the best of our ability.

8.30 p.m.

Mrs. Jean Mann: This has been a very eventful Budget. It has almost made the people of this country gasp. This Debate has, on the contrary, been dull, flat and uninteresting. Who would deem that this Budget deals with the price of bread, butter, margarine, sugar, potatoes, cooking fats—the necessities of life? Who would deem that it deals with the price of linoleums and carpets and cookers? Who, listening to what has happened in this House today from the benches opposite about shareholders—ordinary shareholders, debenture share holders, bonus shares and the rest of it—would deem that it means so much in the lives of every one of our constituents? I wonder if hon. Members opposite, when they go to their constituents, talk to them as they have been talking to us here today, showing that all their interest lies in bonus shares, ordinary shareholders, debenture or preference shareholders? On the contrary, they have been going to their constituents pretending to be sympathetic towards the poor housewives, and about the burden the housewives are carrying. Not a word has been said by them to any about what this Budget does for those housewives.
The subsidy to keep butter at 1s. 6d., or 1s. 4d., to keep eggs at 1¾d., margarine

at 9d., cooking fat at 7d., potatoes at 4½d., bread at 4½., has gradually risen until it is now beyond £400 million a year. I can recollect that between 1918 and 1925 eggs were not 1s. 9d. a dozen, but 6s. 2d.; butter was not 1s. 4d., but 3s. 4d.; sugar was not 3d., but 1s. 2d. I do not think that hon. Gentlemen opposite like me to talk about plain ordinary things like that. Probably they would prefer me to talk about bonus shares and debenture shareholders, but I am here to talk about what the Chancellor has been doing for the housewife, because I hear very little about that, and it. is time that something was said about it. I assume the hon. Members opposite have no proposal whatever to help the housewives, or they might have mentioned this very important phase of our day-to-day life—£400 million odd being spent to keep food prices low. Do they object to it? Do they agree with it? We ought to know.

Lieut.-Commander Gurney Braithwaite: On the contrary, we introduced it.

Mrs. Mann: You introduced it and in your Budget of 1944 the then Chancellor gave a hint that it was time that the subsidy dropped. In 1945 you again deprecated it; your Members have written to the Press deprecating that subsidy, and speeches made from the opposite side of the House have all been directed to showing how you would so alter this Budget, that you would reduce taxation. Where then would you reduce taxation? If one looks down the debit and credit side of this Budget where would you reduce taxation? Undoubtedly you would have your eye on the biggest item on the whole expenditure.

Mr. Deputy-Speaker: I have my eye on the hon. Lady. I am not responsible for these things.

Mrs. Mann: Undoubtedly hon. Members opposite would have their eyes on this item, which figures larger than any other item in this Budget. I would like to say, in a somewhat mildly critical mood, that this Budget began on an April day, with the wind blowing very gently, and the Chancellor announced one windfall after another. Towards the end, however, it was not a gentle April wind that struck us. We were struck with the hurricane force of a gale, when the Chancellor announced his sweeping tobacco tax. I


hope that something will be done to temper the wind to the shorn lambs—our old age pensioners—before the day is out.
There is, however, one thing which I should like to ask the Chancellor. My hon. Friend the Member for Rotherhithe (Mr. Mellish) said that the public are becoming well informed. They are indeed, and they are asking whether supplies of tobacco cannot be had from Rhodesia or elsewhere in the Empire or from other non-dollar countries. On one occasion the Chancellor replied to, that by saying that those countries had not sufficient supplies to give us. I want to know whether, if they had sufficient supplies to give us, we should be allowed to buy. I remember that when the Chancellor announced his tax there was a meeting of the tobacco growers in America. That meeting was reported in the "Observer." They had a meeting and agreed that, so long as we kept within the discriminatory clauses attached to the Loan, there would he no reverberations. I want to know if the Washington Loan Agreement or the Bretton Woods Agreement prevents the people of this country from buying tobacco where they can find it. If that is so, if we are so tied by our agreement with America, then it is a sad reflection on the United States that it should impose such agreements on the people of these little islands, who stood alone and helped America to keep its position of being able to dictate terms to the rest of the world.

Mr. Harold Roberts: Would the hon. Lady agree that it is also a sad reflection on those who voted in this House for the transaction?

Mrs. Mann: Yes, I think I would. I am very glad to say that I did not vote for the American Loan. I noticed also that the Leader of the Opposition, invigorated by the air of Scotland, actually burst forth into telling an audience that he had helped us to get that Loan. All I can say therefore to the right hon. Member for Woodford (Mr. Churchill) is "Thank you, for nothing."
There are other items in the Bill to which I would like to refer—gas and electric cookers. I think the Chancellor has made a great mistake in imposing the Purchase Tax on these goods I hope he will realise that the purpose of the Purchase Tax was to prevent the unnecessary

use of electricity and that no one switches on a cooker just for tun. The imposition of such a tax will mean a great burden on local authorities.
I conclude with another reference to those windfalls that the Chancellor announced on that April day. I noticed at the time that those windfalls seemed to be very numerous indeed, but they were non-recurrent, and I do not think that, on an income and expenditure basis, a non-recurrent item is easily dealt with. However, the Chancellor did explain to us that he intended doing something for the local authorities. I am certain that any proposals that he has to make to the local authorities for the reduction of their old outstanding loans, will be received with very great gratitude. When I was a magistrate of Glasgow, I found on examining the balance-sheet that in one particular year we were carrying an unemployment figure of 90,000 in a population of 1,108,000, an exceptionally heavy proportion Our public assistance rate was costing us £2,500,000; but so also was our rate of interest on borrowed money, some of which had been borrowed at 10 per cent., and a great deal at 6 per cent. We were faced with the non-producer at the top of the ladder requiring £2,500,000, and the non-producers, the unemployed, at the bottom of the ladder, also having £2,500,000 from our budget, I am certain that the local authorities and every overburdened ratepayer will welcome a proposal of the Chancellor which will bring him relief in this respect.
I think that, on the whole, it is a satisfactory Budget. None of us could be pleased with anything in these days; least of all can we be pleased with the frantic and futile antics of the Members of the Opposition, but we shall press on towards the prize of better things to come, to which this Budget has introduced us.

8.44 P.m.

Mr. Douglas Marshall: ; n following the hon. Lady the Member for Coatbridge (Mrs. Mann), may I say that I found her speech from time to time strangely odd? The hon. Lady started off by suggesting that hon. Members on this side of the House had not attached a great degree of importance to those matters which concern the housewife. I think she is forgetful that there is, in our Parliamentary procedure, a Committee stage after the Second Reading of the


Finance Bill, on which specific matters such as gas and electric cookers and things of that kind can be debated. I also think that the hon. Lady seemed to be unmindful of the fact that the Chancellor was the Minister who raised the question of subsidies, and in bringing his Budget speech to the Floor of the House, he said:
The old policy, of using food subsidies to keep the old index stable, cannot be applied to the new, for the reasons I have given. This means we shall have to devise, in due course, a modified policy, which will no longer aim at an absolute stability, and will, I hope, cost the taxpayer less money."—[OFFICIAL REPORT, 15th April, 1947; Vol. 436, c. 46.]
Hon. Members on this side of the House pressed the Chancellor, again and again, to say what exactly he meant by that, and, for better or worse, and wiser or not—and the Chancellor has at times great wisdom—he decided not to go on with that particular subject at that particular moment. I think that is sufficient answer to the hon. Member for Coatbridge.
When I was listening to the Budget speech of the Chancellor nearly a month ago, I remember wondering exactly what he was trying to do. I wondered with what he was trying to inspire us, because the hon. Lady has said that the one thing that was true about the Budget Debate was that it was dull, and it was lacking in any form of incentive for enterprise.

Mrs. Mann: I never used such a word. I referred to the speeches of hon. Members.

Mr. Marshall: I would like to assure the hon. Lady that if, in the words I used, it appeared that I was trying to misrepresent her, such was not my intention, but I should say that she did mention the fact that the Budget Debate was dull. With regard to the actual Budget. the Chancellor approached it in the manner of a conjuror who produces white rabbits out of a hat, though he may have said that the rabbits were not white. To my mind, his rabbits were like all the rabbits produced by magicians, in that they suddenly started disappearing again, and were. no longer rabbits of revenue but rabbits of capital. When the Chancellor touched on the question of tobacco, I do not agree that there was great cheering for the introduction of the tobacco tax. So far as I remember, hon. Members on this side of the House were in complete agreement

with the Chancellor in cutting down the importation of American tobacco, but they expressed the view that, if he wanted to cut it down, he ought not to cut it down by means of a tax which would hit the people of the smaller income groups.
I sincerely trust that the Chancellor will really produce a good rabbit for the old age pensioners. Probably all hon. Members in this House during this month have been frequently in their constituencies, and I think they will agree when I say that the old age pensioners are having a pretty bad time. They just cannot afford this extra taxation on tobacco, which is the last thing left to them, and I ask the Chancellor, however difficult it might be administratively, whether he cannot offer them some form of cheaper rate tobacco. A short time ago, I asked the Chancellor a Question which he did not answer at that time I would be glad if he will let me know today what actually would be the cost of the concession of tobacco at the cheaper rate for those men and women in His Majesty's Services. I would like to know, because I do not believe that it is very much
One hon. Member has spoken about the disabled and similar classes of people. I trust that, if the Chancellor is going to produce one good rabbit at the end of his winding up speech, he will have due regard to those men who are disabled and who may be in hospital for the rest of their lives—possibly, ex-Servicemen—and will see if he cannot devise some form of administration that will allow them to get their tobacco at a cheaper rate. I cannot believe that there is any hon. Member in this House who would not be sympathetic to this suggestion. In conclusion, I would like to say that I feel that this Budget is lacking in incentive, in enterprise and does nothing to make the people fully realise the frightful difficulties which our economy, internal and external, is undergoing. In producing the rabbits the right hon. Gentleman mesmerised the people by the thought of a surplus. There is no real surplus, and the Chancellor knows it.

8.51 p.m.

Mr. Stokes: I should like to start by referring to two points mentioned by the right hon. and gallant Member for Gainsborough (Captain Crookshank) when replying to the opening speech of my right hon. Friend the Financial Secretary. He


said—and I agree with him—that it is very important that the maximum incentive should be given to production. He submitted that this Budget does not do much in that direction. I do not wish to criticise the Budget on that score at all, but I want to say to the Chancellor that, in my opinion, he has to find some way of making a material difference to the people who do the work, if he wants them to do more work. In other words, more consumer goods have to be put into the shop windows. I have just made a fairly comprehensive tour of countries which are supposed to be very much below our standard of living. I can only say that I found their shops full of everything at not unreasonable prices. It seems to me that some way has to be found to do that. I do not know how the Chancellor is going to do it, but he will have to exercise some pressure on my right hon. Friend the President of the Board of Trade with a view to stopping excessive exports, and keeping more goods in this country for the people who produce them.
The right hon. and gallant Gentleman emphasised the need for cutting dollar purchases. Frankly, I cannot understand my right hon. Friend's attitude in this matter. I cannot understand why he does not bar American tobacco absolutely. I cannot understand why he does not bar American films absolutely. I believe that both those things, if properly tackled, would enable the producers of this country to have more of the things they really want. Nobody pretends, for a moment, that education in this country would not benefit if we had fewer American films. I wonder how much my right hon. Friend has studied the link-up between the cinemas in this country and the film industry in America.
On the question of tobacco, an hon. Member said that there was not enough tobacco in other countries, and that, therefore, we must get it from America I do not believe that. At the present moment, America buys 30 times as much tobacco from Turkey as we do. There is no reason why we should not cultivate a taste for a decent tobacco, instead of smoking tobacco which no American can smoke, because no self-respecting American would smoke a Virginian cigarette. Therefore, I commend to my -right hon. Friend both those suggestions which would achieve his object and, at the same time, make it possible for us to

have more consumer goods for the enjoyment of our own people.
There is a second point with which I wish to deal before I come to the main theme of my observations, which, probably, some hon. Members have anticipated. I was much astonished to hear my hon. Friend the Member for North Battersea (Mr. Jay) and my hon. Friend the Member for Blackley (Mr. Diamond), and an hon. Gentleman opposite—although I was not so surprised at what he said—speaking in condemnation of the Chancellor because of the tax on bonus issues. I was astonished to hear them say that bonus issues were necessary in order to encourage the ploughing back of profits into industry. I do not believe that to be so at all. I believe it is perfectly possible to plough profits back without having bonus issues. I have always taken the view—I have had some experience in a minor way in these matters—that bonus issues have two evil effects. First, they conceal, both from the general public and from those of the workers who do not understand the position, what the real profits of a business are. That is the minor evil. The major evil is that, having made a bonus issue in good times, one is then in the position of having to pay dividends in bad times, and to sweat the worker in order to get the profits to do so. Therefore, while I accept the argument that it may be necessary to have bonus issues, I do not like them. In fact, I would encourage the Chancellor to put a heavier tax than he has already done on bonus issues, and I commend him for what he has done.
The Chancellor has intimated that there is going to be some reorganisation of local loans so that interest-bearing bonds—long term loans—will be revived. I should like to quote one example in my own constituency which I hope will be affected by his decision. In 1920, my constituency raised a loan from the "Pru" of £25.000 for 60 years at 6¾ per cent., without a break clause. When we have paid it all, we shall have paid something like £102,000 for the use of that money. So far, we have only submitted for 26 years. I hope that the Chancellor will find some way to compromise with the "Pru," so that we do not have to go on for the next 34 years. I do not know whether he is going to find a legal way round it, but I hope that he will give the matter consideration, because I am sure


there are other constituencies, besides mine, which are affected in the same way.
I rose mainly to support the theme so ably developed by my hon. Friend the Member for Penistone (Mr. McGhee), when he reminded my right hon. Friend the Chancellor that in the Debate last year—in reply to a speech which I made and which some other hon. Members supported—he promised that he would give consideration to introducing an enabling Bill at a later date so that local authorities could, if they wished, make their own valuation of land, and levy a part or the whole of the rate on site values. He said that he wanted support for that proposal. To my knowledge he has the support of 130 hon. Members of the Labour Party. In addition to the l99 boroughs and county councils who earlier passed resolutions in favour of such an action, some 80 have done so since. I regret that, so far, no mention has been made of the matter, either in the Budget or in the opening speech of my right hon. Friend the Financial Secretary. I hope that my right hon. Friend the Chancellor will do what my hon. Friend the Member for Penistone asked, and will reassure us tonight that we shall get an enabling Bill next Session for this purpose. If my constituency were allowed to levy a 10s. tax on land in Ipswich, we could do away with all other forms of rates, and raise the £500,000 a year which we require. It would produce all the rates we require, and more. One-third of the borough is idle, and because it is idle it is unrated, and makes no contribution to the rates, even though it has this very high value.
I now turn to a more important aspect, or question. I ask the Chancellor why he does not consider introducing a comprehensive levy on site values for central revenue purposes. He is constantly in need of new revenue, and I cannot understand why he does not emulate the good example of Lord Snowden who actually got a Measure on to the Statute Book. That Measure, owing to the scurrilous attitude of the Tories opposite, was removed, and we have nothing like it today.
I want to deal briefly with some of the objections which, from time to time, have been levelled against such a proposal. There was one argument which the Chan-

cellor used, to my surprise. I appreciate that he needs no lecturing on this subject. I am not lecturing him; he knows as much about this subject as I do, and probably more, but other people do not, and, as my right hon. Friend knows, the great weight of opinion is really what gets things done. The argument has been put forward that it would cost too much money. The Chancellor himself said he had not got the staff. I would remind the House that in the Town and Country Planning Bill it is contemplated spending £1 million a year for five years on staff to make what I consider to be a completely bogus valuation. When they have done that, what are they going to do? Are they going to collect revenue? Certainly not. They are going to pay out £300 million—not get it in. What is the alternative? Our alternative proposal is the expenditure of million a year on staff. I agree it means double the amount of staff, if my right hon. Friend's computation is correct; I have not got the actual figures of staff involved. Our proposal means the expenditure of £2 million a year on staff, in order to bring in what can be. not an expenditure of any kind, but a revenue of £500 million a year. [An HON. MEMBER: "Only that?"] Well, probably £1,000 million at today's values but, as hon. Members opposite know, I never overstate my case.
The second objection is that it is better to deal with this problem by a block grant. I understand the problem of shifting the burden from the poorer to the richer places, but I am not altogether sure that that is right. It is no fundamental cure. In the end, block grants have to come out of the pockets of the workers, whether they be workers in rich areas or in poor areas. I wish my right hon. Friend the Minister of Health were here. I detect his hand in this. While I greatly admire his debating and administrative ability and his pugnacity—in fact, I have probably been into battle with him more than anybody else on this side of the House—I very much doubt whether he really understands this problem. That is a hard thing to say. I do not believe he really understands how effective and fundamental is the introduction of a tax on site values. I hope when he reads my speech tomorrow—my speech of what I am going to say now, and not of what I have already said—that he will take note of my remarks.
The next objection which has been raised and which, no doubt, will be raised tomorrow, is that the Town and Country Planning Bill has already taken the "cream." I do not know what that means. Personally, I think the Town and Country Planning Bill is in a mess—[HON. MEMBERS: "Hear, hear."]—on this valuation question, I mean. Many of us on this side of the House complained that to fix the rate at the 1939 level was wrong. That has now been swept out of the way. That target has now been removed, and goodness knows where the limit will go to. Be that as it may, this purchase that is proposed, with an expenditure of £300 million, does nothing whatever to stimulate production. All that it does is to compensate people for being idle. I have always understood that a man, when he does not work, gets less; but a landlord, if he does not work, gets more for doing nothing. By our rating system, provided that one does not use one's land, one pays no rates. As long as nothing is done with the land, one has a potential chance of making an enormous fortune. In the Town and Country Planning Bill that is precisely what is contemplated. We are to pay out this sum. I would not mind it so much if the fundamental issue were tackled at the same time. Idle men get less for doing less. but idle land seems to get off scot-free. No doubt it is because the fundamental rules, on which the laws of this country have been based for so many decades and generations, have been governed by the landlords, who are represented by the Tory Opposition.
I come to the fourth objection to introducing this Measure. Quite responsible people often say, "Don't bother about it, because the Death Duties will put it right." The Chancellor said that houses will be handed over as part of Death Duties. I am delighted, but that will not put it right, because the Ecclesiastica1 Commissioners do not die, Oxford and Cambridge do not die, the Nuffield Trust does not die, the building societies do not die. Here they are, all round the country, buying up idle land for one reason only—that it is the soundest investment and in the end it gives the best return.
I conclude by quoting two fundamental reasons why the Chancellor should con-

template introducing a fundamental measure of this kind. I want, first, to say with great respect to my party[Interruption.]—I have no respect for the other party—and with great respect to their sincerity, that there is all the difference between a panacea and a cure. I do not think that old age pensions ought to be necessary; I do not think there ever ought to be any unemployment. I do not think that half the things we do we ought to have to do, because the condition of things which causes some of them ought not to exist. With that argument I do not suppose a single person on my side of the House disagrees. Things like old age pensions, Beveridge plans, and the rest, are nothing more than a super-Zambuk. They are ameliorative measures put on to stop irritation. What you want to do is to cure the bloodstream of the body politic. If a mother takes to a doctor a child suffering from a skin disease and the doctor tells her to go and buy some Zambuk, the mother, if she has any sense, will go to another doctor who will examine the bloodstream of the child and make a fundamental cure. We shall never get the economic system right in this country, or anywhere else, until we tackle the fundamental issue of the land and raw materials.
I speak as a Christian, as most of us here, perhaps—I do not know—are. I believe in the Christian ethic. The Christian teaching is very simple. It is meant for all people, at all times, in all places, and in all conditions. I know that some wag said it would be easier if there were not the Ten Commandments, but they are not difficult to understand. Surely, there must be some sort of parallel economic system, which, running with that, will make it possible for people not to be obstructed in their efforts to be Christians, but will make it easier for them. It ought to be applied immediately all over the world. I want to give two quotations based on this philosophy. The first is:
A man's needs do not die out, but for ever recur. Although satisfied today, they demand fresh supplies for tomorrow. Nature, accordingly, must have given to man a source that is stable and remaining always with him from which he might hope to draw considerable supplies, and the stable condition of things he finds solely in the earth and its fruits.


The next quotation is:
For God has granted the earth to mankind in general, not in the sense that all without distinction can deal with it as they like, but rather that no part of it was assigned to anyone in particular, and the limits of private possession have been left to be fixed by man's own industry and by the laws of individual races.
That is the Workers' Charter, issued by Pope Leo XIII, on 15th May, 1891. The earth, and the raw materials of the world, should be made available for the benefit of all mankind. The right way to do it is not to encourage people to hold up their land, not to pay them vast sums in compensation for having done so, but to stimulate them to use it for the benefit of others, penalising them if they do not and encouraging them if they do. Thereby we shall ensure that all people have enough to live on.

9.11 p.m.

Mr. Osbert Peake: The House always enjoys listening to a speech from the hon. Member for Ipswich (Mr. Stokes), whose views on the question of the taxation of land have not shifted, or moved or advanced in any way since, 27 years ago, he left a thin, paper-covered edition of Henry George's works accidentally in my home. I sometimes envy the diehard attitude of the hon. Gentleman. If I may, I should like to deal with many of the matters covered in the Finance Bill. I hope it is not too late for me to address a serious argument to the House. As my right hon. and gallant Friend announced earlier, we intend to vote against the Second Reading of the Bill. That is an unusual, though not an unprecedented course. If I advance a serious argument at this late hour I hope that the Chancellor will give me a serious reply.
Peacetime Budgets nearly always contain two or three popular features. The only exceptions I can recall are Mr. Snowden's autumn Budget of 1931 and the Chamberlain Budget of 1932. It is very unusual and very easy, when the Second Reading of the Finance Bill is opposed, and very simple and superficial in my opinion, for the Government spokesman to reply by enumerating any popular features which he can find in the Bill and to say that the Opposition are going into the Lobby against, for example, an in. crease in the earned income allowances, against a repayment of postwar credits for

the old, or against the repeal of the duty upon armorial bearings. We have all seen that Parliamentary gambit played; many of us have seen it played a good many times. The right hon. Gentleman played it last year. He enjoyed himself in so doing. I do not think he will be able to do the same thing again this year, because it is a trick which can be played only once in a Parliament. It can be played with the greatest success when there are a great many new Members in the House. This method is not really a substitute for a reply to serious criticisms both of last year's Finance Bill and the present Bill.
The serious criticism is that if the Government care a rap—I emphasise the word "rap" because other speakers have used a different expression—about economy, taxation at the present appalling levels would be unnecessary. That criticism is of more force today than it was 12 months ago, since the terminal savings due to the end of the war have now virtually come to an end. In the Government White Paper the sum of £320 million is described as "terminal charges." I shall be surprised if a great many of them do not prove to be charges which will continue. At any rate, the right hon. Gentleman in his Budget statement said he could not look forward to any further substantial reduction of expenditure next year because there are other items which are increasing as these war terminals disappear.
I am very much encouraged in the hope that we shall have a serious reply from the Chancellor of the Exchequer this evening by the reply which he gave on the Committee stage of the Budget Resolutions. On that occasion he stated two points of view on this question of public expenditure, and gave a rather surprised Committee the impression of a reasonable and fair-minded man. If I may I will quote him, because it is well worth quoting:
There are two distinguished points of view which are held in this country. … Broadly, there are some people who think that it is worth while to have a pretty heavy level of taxation, provided that the proceeds are spent on various forms of what are called the social services …. There is another school of thought that thinks that it is dangerous to proceed so fast along the road of developing social expenditure because that means keeping the level of taxation higher than it would


otherwise be if there was less social expenditure. … They think that it is therefore, better to seek in the first instance, substantial and rapid reductions in taxation at the cost of delaying social development and social security schemes. That is surely the difference between hon. Members opposite and my hon. Friends on this side of the Committee."—[OFFICIAL REPORT, 17th April, 1947; Vol. 436, C. 460-1.]
That statement I think, at any rate, has the appearance of sweet reasonableness about it.
The Chancellor was really, if I may say so, making a false antithesis and overlooking a third possibility which I will develop. The word "economy" in its true sense, as the right hon. Gentleman, being a scholar himself, must know, means nothing more or less than good housekeeping, getting value for money spent, spending well as opposed to mere spending. True economy can be achieved at any prescribed level of expenditure if there is value for the money spent. My view—and I shall support it by examples—is that we are not at the present time getting value for our money or spending well. I hope, therefore, that the Chancellor will not use the old worn-out Parliamentary device that he is rather fond of using—he has picked up a good many of these Parliamentary devices in the course of his passage through this House—and say that when I make a plea for economy in the true sense of the word, all I am doing is showing that the Tories want to cut the social services, and would they indicate which of the social services they want to cut? All of us have heard that one before for it has been played many times.
True economy—and I hope hon. Gentlemen opposite will agree with this, for I rather think they will if they think about it—and the cutting down of the social services are by no means the same thing. I hope I have the assent of every quarter of the House in making that statement. It is quite possible to achieve the one without doing the other. In fact, if hon. Members study the Estimates, they will see that only a minor part, even of our civil expenditure, leaving the defence expenditure out of the calculation, is directly connected with the social services. I believe that there is still much waste of public money which brings no advantage to anybody. I and my colleagues on the Public Accounts Committee—of whom I am glad to see a number in their places

here tonight—spend two whole days of the week doing a thing which is, perhaps, a little strange to most hon. Gentlemen opposite. For two days a week we face the past, and look at the public accounts to see what has been happening with public money. I do not, of course, claim to weak in any way for the Public Accounts Committee or for any of my colleagues. I express only my own views as the result of my experience gained on that Committee, and by constant, almost daily contact with that great public servant and servant of the House of Commons, the Comptroller and Auditor-General. I believe that there are valuable lessons which the Chancellor might learn if he would spend perhaps half a day a week facing the past and reading the reports of the Comptroller and Auditor-General and those of the Public Accounts Committee. Expenditure for 1947–48 is estimated at £3,200 million. When I was at the Treasury in the summer of 1945 with my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) we were pressed at the time of his Budget to give the House an estimate of what a postwar peacetime Budget would look like. We did not oblige—there is far too much secrecy practised by Government spokesmen in these matters—but we did in fact make such a calculation. It may interest the House to know that with such advice as we could obtain at that time and at that place—and very good advice is to be obtained at that place—we formed the idea that a peacetime Budget would probably balance after the war at a figure of about £2,000 million. That was after allowing for all the expenditure on the Beveridge and other social developments planned in the Coalition Government, the Education Act, a comprehensive health service, family allowances and so on.
That £2,000 million was divided in this way: debt charges £500 million, defence £500 million, other Civil Service expenditure £1,000 million. There is a very big gap between our 1945 estimates of a postwar Budget at £2,000 million and this year's Estimates of £3,200 million, There is, in fact, a difference of £1,200 million. Some of that, of course, is due to the fact that we were wrong in our estimates of defence expenditure; £500 million was too low. As hon. Members know, the actual


figure for the current year is no less than £900 million. I will concede at once that that includes £120 million of terminal charges, so that at £780 million defence is costing us £280 million more than we thought it was likely to. I admit that our forecast was wrong. We did not know that the international situation would prove as difficult as it has proved to be. All the same, even allowing for the mis-hit in our calculation of defence expenditure, and for the fact that there remain some terminal charges included in the Civil Estimates—perhaps £300 million worth—there is still a gap of several hundred millions between our 1945 Estimate and what the Government are now going to spend.
I am positive that at the present time, with good national housekeeping, we can save hundreds of millions of pounds a year. During the war, Treasury control over the big spending Departments, including the defence Departments, was greatly relaxed. It was quite impossible, in war conditions, for an official or anyone else at the Treasury to say, "You shall not spend this." The argument, "If you do not spend this or that, you will lose the war," was obviously one which carried immense power and conviction. The question I want to ask the Chancellor is this: Has Treasury control yet been re-established? The Chancellor never mentions "economy." I think he is frightened at the word. I think it conjures up to his mind the picture of a May or Geddes Committee. In public, at any rate, the word "economy" seldom falls from his lips. Unless a Chancellor of the Exchequer is known to desire that money shall be carefully and wisely spent, his officials are not likely to attempt what is always a difficult and unpopular task. I want to ask whether anyone ever gets a word 'of praise for stopping something being spent. Does the Chancellor of the Exchequer ever say, in regard to one of his colleague's proposals, that the state of our national finances does not permit of it being undertaken? Does the Chancellor of the Exchequer ever give anyone a "raspberry" when he finds that money has been badly spent? Does he mind, for example, that £58 million of the taxpayers' money has gone straight down the drain in black market transactions in North-Western Europe? Does he mind, as is mentioned in the Comptroller and

Auditor-General's Report on the Vote of Credit Appropriation Accounts, that we are told, in regard to the Control Commission for Germany and Austria, that:
Accounting falls far short of normal standards. There were shortcomings in vouchering, and over-payments and duplication of payments have occurred. Considerable over-payments are being found in accounts of staff who have left the service, occasioned largely by delay"?
We are spending, this coming year, over £80 million on the Control Commission. Last year it was £130 million. Surely it is fantastic that at the end of the war we should be paying out these vast sums to support Germany, when we have a huge burden of armaments to support and they have none, and a great deal of this money, as the Report shows, has been wasted.

Mr. Stokes: What does the right hon. Gentleman propose the Germans should do? Does he propose that they should starve?

Mr. Peake: I am proposing that we should try to manage our affairs wisely and well, and not waste public money.

Mr. Stokes: In other words, let them starve.

Mr. Peake: I am quite prepared to say a word about that. The British zone is the richest industrial part of Germany. It ought to be a very paying proposition from our point of view, and properly managed, it could so be made in a very short time. It is quite wrong that we should bear this heavy burden without any hope, apparently, of getting any of our money back.
Let me give one further example of wasting public money. It is on a much smaller scale, but I believe it is being repeated many times over. The Comptroller and Auditor-General reported on the Civil Appropriation Accounts that the British Council had paid for 89 new motorcars in advance of their being delivered because they were afraid they would not have so much money in the till next year, and he states that the Treasury expressed their concern that the Ministry of Supply, who had a large number of secondhand motor cars to dispose of. had not been consulted.

Mr. Benson: The right hon. Gentleman ought not to quote that.

Mr. Peake: I am doing no more than quoting from the published document—


the report of the Comptroller and Auditor-General. I make no comment at all; I state the facts as they were stated in that report. I assure the hon. Gentleman I would not make any comments of my own upon these matters, but I am quoting a document that has been presented to the House by a servant of the House, the Comptroller and Auditor-General.

Mr. Benson: The reference was to the treasury.

Mr. Peake: The reference to the Treasury will be found in paragraph 14 of the report of the Comptroller and Auditor-General.
There are two other features which anybody examining the public accounts is bound to notice at the present time. First, where constructional work is carried out, hon. Members will find that the original estimates are almost always hopelessly inadequate. Our schools, temporary houses, Government offices, the new House of Commons, will cost us infinitely more than the original estimates, and the reason given in the accounts always is the rising price of materials and of labour. The second feature common to numerous spending Departments is that work provided for in the Estimates is not carried out during the year for which it has been provided. The work is only partly carried out for the reason given of shortage of labour and materials. One is driven to the conclusion by these two factors that Government Departments compete, in spending, against one another for a labour force and for materials which are not there. The result is that there is no effective competition between the contractors who quote for or undertake Government work. I am certain that a vast amount of public money is wasted from these causes.
I want to refer to the growing staffs of Government Departments. Each year there is published a memorandum by the Financial Secretary to the Treasury on the Civil Estimates. It is a very enlightening document and contains an appendix setting out those Departments where the increase in the Estimates is more than £1 million, and in the last column it gives the main causes of the increases. In Department after Department one finds this sort of thing:

Ministry of Health, increase £18 million. Main causes: provision for increased staff for new services";
Ministry of National Insurance, increase £22,500,000. Reason: expansion of staff.
[HON. MEMBERS: "Hear, hear."] Hon. Members may cheer, but one of the objects of the Beveridge Plan was to bring together, throughout the country, under one roof the offices of the employment exchanges, the Assistance Board and the health services. There was to be a single social security office. I thought that administrative saving would result. In point of fact, the Departments which are administering the various benefits are still working quite independently, and large numbers of new offices, I think over 1000, are to be erected for the Ministry of National Insurance, the new Ministry which has come into the picture since the war.

Mr. Solley: Has the right hon. Gentleman taken into account the enormous staff at present employed by the insurance offices dealing with workmen's compensation, which work, in future, will be done by the Ministry of National Insurance?

Mr. Peake: I was only stating the view, looking through this interesting and important—[HON. MEMBERS: "Answer."] The hon. Gentleman makes a false point. Workmen's compensation is still being administered by the insurance offices and by the mutual associations. It has not yet been taken over by the Government, and this transfer of functions has not occurred. There is no reason for increase of staff on that account until it has. The same thing occurs in Department after Department: Board of Trade, increased, expenses of administrative; Ministry of Agriculture, increased salaries and other administrative costs; Department of Scientific and Industrial Research, increased staff; Ministry of Works, increased staff; Inland Revenue, increased staff; Post Office, increased staff. I advise hon. Members to study this statement.
I want to make this point: Some hon. Gentleman opposite said that this was a counter-inflationary Budget. Surely, hon. Gentlemen must realise that Government: expenditure itself can have inflationary tendencies. The Government today spend one-third of the national income. They spend £1 for every £2 spent by the rest of the community, and Government Departments are competing against each


other for a limited supply of labour and materials.
There are other examples of wasteful expenditure to be found in Class X of the Estimates, what are called the War Services of Civil Departments: Advances to Allies, £27 million, includes £21 million, a temporary loan to the U.S.S.R. for goods on which the right hon. Gentleman has reduced the rate of interest from 3 per cent. to 2 per cent. The cheap money policy is extended to help the U.S.S.R. as well. Civil Defence, put in as a terminal service, £25 million. Nearly half what we used to spend on the Navy before the war is to be spent during this coming year on Civil Defence. Either these services ought to go on in peacetime, or they are services which ought to have been abolished. In the third year after the end of hostilities, £25 million for Civil Defence, and £135 million on what the right hon. Gentleman calls the civil element of the Ministry of Supply. In that vast total of £135 million is no less a sum than £48 million put down as being for research and development. It really is a vast sum when compared with what the British Navy cost us 10 or 15 years ago. I suggest that there are many ways in which some considerable economies in public expenditure could be effected.
I now wish to say a few words about food subsidies. The right hon. Gentleman made a very cryptic statement in his Budget speech, which I think the Lady the Member for Coatbridge (Mrs. Mann) must have found very disturbing. He said that we must find some modified form of the food subsidies. What does the Chancellor intend to do? Does he mean to modify them; does he mean to maintain them, or is he just hoping for something to turn up? He was a little more enlightening when he replied to the Debate at the end of the three days' Committee stage. He made a very interesting reference, occupying nearly a column of HANSARD, to the subject of pilchards. He told us that the consumption of pilchards was no longer to be subsidised at the expense of the Exchequer. When I heard this rather insignificant fish—described by the right hon. Gentleman as a very delightful form of fish—my mind went back to 1929, to Lord Baldwin and the tax on imported broccoli. Perhaps few hon. Members will recall those days, but broccoli did, in fact, mark a new depar-

ture in Conservative agricultural policy: It was a case of very small beginnings upon which great things followed. I have been expecting to hear something further on this subject of food subsidies, after the right hon. Gentleman's reference to pilchards. I said to myself: "Why should the right hon. Gentleman's benevolence be confined to the pilchard alone? Why should not comparative safety be extended to the sardine? What about the whitebait?" But so far nothing further has emerged from the lips of the right hon. Gentleman. This fish has turned out to be nothing more or less than a small red pilchard after all. Perhaps something more may be said tonight, or at the party conference at Margate next week.
High expenditure necessitates high taxation. Although the hon. Member for Coatbridge thinks it of no importance, I ask: How can industry extend. particularly new enterprises—

Mrs. Mann: I do not think the right hon. Gentleman can find anything in my speech to indicate that I thought high taxation was of no importance. What I said was, that hon. Members opposite had not a single idea to advance as to how that expenditure could be properly and adequately lowered.

Mr. Peake: I hope that in the course of the last 20 minutes I have filled the gap in the hon. Lady's mind. I ask myself: How can industry, and particularly new industry, develop or extend under the present crushing burden of direct taxation? Today we are in a quite unprecedented situation in the world. We are a great debtor nation and a great industrial nation. It is all right to be in debt, if one is a primary producer; then one will always have, at any rate, something to eat. The insolvent farmer can always get his breakfast. But we are in the unprecedented situation of being a great debtor nation depending upon exports for our food. If we are to survive, we must grasp at all new processes, at all scientific developments and apply them to production.
The rate of direct taxation today on industrial profits is comprised of two elements: 9s. in the £ standard rate of Income Tax, and 1s. in the £ Profits Tax so long as profits are not distributed. The combined effect of these two rates—and there is some little interplay between the


two—is not quite 10s. in the £ With a tax of 10s. in the £ on undistributed profits, the dice are heavily loaded against the man who starts a new business. That is the reason why there is such a passion today for all forms of gambling—for the dogs, football pools, etc.—because a man has a much better chance of getting rich quickly in any form of gambling than he has in a new and speculative business.
Here I wish to refer to the incidence of the Chancellor's tax on what are called capital bonuses, upon the weight of direct taxation. The Chancellor says, "Plough back," and a great many people are anxious, and indeed keen, to follow his advice. Some have not been so good, and have been rapped over the knuckles in consequence. But it is not very sensible to say, "Plough back," and then proceed to nationalise industries upon the basis of Stock Exchange values, which, in their turn, depend upon the recent rate of dividend. In one or two cases, electricity undertakings increased their dividends, their share values went up, and they received much more in compensation than they would otherwise have done. This will be noted by the gas undertakings, which are next on the list, and by any other form of industry which anticipates nationalisation. "Plough hack," says the Chancellor, and if businesses do so, and capitalise their rèserves in order, as the hon. Member for Blackley (Mr. Diamond) said this afternoon, to put those profits beyond the possible temptation of ever being distributed, the Chancellor imposes another 2s. in the £, another 10 per cent. in direct taxation. Therefore, where money is ploughed back, where the reserves are capitalised so that they form a permanent part of the structure of the business, the rate of tax is 9s. Income Tax, plus 2S. capital bonuses tax, plus 1s. Profits Tax, a total of some-thing like 12s. in all. With that burden of taxation, new industry, which we need so badly, cannot be developed in this country.
I want also to say a word about the Purchase Tax. I must confess that I thought that one of the most unwise statements I have ever heard made in. this House was the Chancellor's declaration in his first Budget that he regarded the Purchase Tax as a permanent part of our fiscal policy, and that he hoped to raise from it

annually a sum of £150 million. Nothing could have been more inflationary than that statement. It the Chancellor had said: "The Purchase Tax is a bad tax, a wartime tax, I want to get rid of it, and I look forward to reducing it as time goes on," people would have kept their money in their pockets, or put it in national savings, saying, "Values will improve. I shall get better value if I keep my money for a year or two." Instead, the Chancellor declared that the tax was permanent, and people said, "As there is a shortage of goods, and as prices are not likely to come down, we had better go into the market and try to buy now." Having made that initial error, the Chancellor goes on to decrease Purchase Tax one year and increase it the next rather like "up and up and up," as the late Mr. Ramsay MacDonald said. The Chancellor's manoeuvres over Purchase Tax can only be compared with the military ones of "the Grand Old Duke of York." "We were all wrong," said the Chancellor, using the word "we" in the royal sense. He was.
Now a word or two about tobacco. The hon. Member for Rotherhithe (Mr. Mellish), in an interesting speech, put forward the proposition that the Tories are always out of touch with public opinion. Then he went on to say that the Tories cheered the Tobacco Duty when the Chancellor mentioned it in his Budget speech, whereas he and his Friends on the other side had been silent to the point of disapproval. The hon. Member then said that he had been down to his constituency, where he found that the Tobacco Duty had been received quite pleasantly, and that he had come back to give it his and their blessing. These statements do not seem to me to make very much sense.

Mr. Mellish: Would the right hon. Gentleman allow me? I would like to make it clear that perhaps the reason why the Conservative Party cheered the Tobacco Duty was the fact that it was the only piece of bad news in the Bill.

Mr. Peake: I do not recollect any cheers for the Tobacco Duty from this side of the House, but I do recollect cheering the Chancellor's intention seriously to tackle this question of our dollar expenditure. I do not believe that the Tobacco Duty will achieve its object. I do not believe that any appreciable reduction in consumption


will follow the increased rate of duty. There is a great deal of surplus spending power in the country at the present time, and, by the mere reduction of savings, or the use of the increased earned income allowance, many people will be able to smoke as much as they did before, without any more cost to themselves.
We are told in the daily Press that the Chancellor is going to make some epoch-making announcement tonight in regard to the position of the Tobacco Duty in relation to the old people. It may be that the Chancellor is going to take off again tonight, so far as the old people are concerned, something that was put on a month ago. Many people earnestly hope that he will do something for the poorest section of the community, because this form of tax is regressive and very unfair. Therefore, many people hope that he will make some concession. The best concession which the right hon. Gentleman could make tonight, in my opinion, would be to sweep away the tax altogether, and adopt a direct approach to this question of tobacco imports. If we want to cut down dollar expenditure, surely the best way to do so is by the direct method. We have been accustomed to shortages during the war, and we have often had to go without as many cigarettes as we wished to have. If that position is restored today, I am sure it would be much better than making a new black market in cigarette coupons issued to old age pensioners.

Mr. George Wallace: Mr. George Wallace (Chislehurst)rose—

Mr. Peake: I am afraid I cannot give way, as I have been led away by interruptions and have been too long already. I promised the Chancellor that I would sit down early, and I must now sum up what I have to say.
We on this side of the House believe that this is a bad Bill. We believe that the Government, at this time, should set our people an example of good and careful housekeeping, and not an example of carefree, happy-go-lucky, live-for-the-day finance. This Bill makes no contribution to the solution of the greatest economic crisis which has ever threatened us. It gives industry neither help for today nor hope for tomorrow. Its real condemnation is that it fails to face the future.

9.55 p.m.

The Chancellor of the Exchequer (Mr. Dalton): As usual, according to the practice of the House, we have gone very wide on the Second Reading Debate, and a great number of matters have been raised, quite properly according to our practice, which are in no way touched upon in the Finance Bill. The Finance Bill provides for the raising of revenue, and kindred matters. In order that I should keep my remarks within due time, I do not propose to take up tonight a number of the Committee points, many of them very interesting, which we shall have an opportunity of considering when, the Bill is in Committee after Whitsun, but, rather, to concentrate what I have to say on the principal matters raised both on the Opposition side of the House and on the Government Benches.
However, may I clear up one point of interpretation raised by the right hon. and gallant Member for Gainsborough (Captain Crookshank)? He asked a question on an apparent discrepancy which I would like to get clear, because it may have misled some hon. Members and other students of this subject. He drew attention to the fact that, on page 31 of the Economic Survey, defence and other public expenditure for 1947 was estimated at 24½ per cent. of the national income, that is to say, of something of the order of £8,000 million. He asked how that was to be reconciled with the figure of £3,181 million which was shown as the total Government expenditure on the Budget statement. The answer is a simple one, and I am sure that the right hon. and gallant Gentleman will instantly comprehend it when I give it. The estimate in the Economic Survey shows how the real resources of the country are distributed, that is to say, the percentage allocated to Government expenditure is net. It is the net Government current expenditure on goods and services, after adjustment has been made in respect of the transfer elements in the expenditure, in direct taxes, subsidies, pensions, and so forth. It excludes the transfer payments, such as the National Debt services, unemployment benefits, and so on, whereas the Budget figure shows the monetary expenditure including the transfer payments. I hope that I have made the point clear to the right hon. and gallant Gentleman.
Turning to various wider matters, I read in the Press that the Government


was to be attacked today—and the Chancellor of the Exchequer in particular—by the Opposition. The Press which supports the Opposition are not always very strong on history. They said that, for the first time since 1939, we have got an Opposition who are brave enough to fight against the Second Reading of the Finance Bill. That is quite inaccurate, of course. I am only sorry that the briefing was not so well done as it might have been. What the Opposition are doing is following a dull Conservative Opposition routine. Whatever we bring in, they do not like it.
Whatever you do and whatever you say, Aunt Tabitha says 'No, that isn't the way'.
They will go on voting against all the legislation brought in by me, or by any other Chancellor of the Exchequer supported by the majority of this House for the rest of their political lives in Opposition. We were to be arraigned, I was told, on two main points. The first was on the ground of extravagance. The right hon. Member for North Leeds (Mr. Peake) made a number of points with which I will deal in a moment. First of all, we were spending too much, and, secondly, we were cooking the accounts. Of course, he did not use such gross language as that. I am quoting from some organs of the Press, the "Financial Times," for example.
I must reply to both those charges, and I will begin with the one which I have just mentioned. The suggestion was made that the item of 270 million is not a genuine surplus, that there is something "phoney" about it—fictitious, as Mr. Asquith said in the case of Sir Austen Chamberlain's Budget in 1921, when an exactly similar Debate was conducted. I have looked it up. Sir Austen Chamberlain had a surplus very much of the same character, made up very largely of non-recurrent items, admitted by Sir Austen Chamberlain, who was a very honest man, to be non-recurrent, and Mr. Asquith rose from the Benches opposite, from below the Gangway—because the Liberal Party are always sitting a little apart from other people, like the Pharisees of old—and said it was a fictitious surplus. I base myself on the very simple fact that when what went out, comes in again, it is still the same. These items which we are recovering, recapturing, "clawing back," to quote the Leader of the Opposition

when he was Chancellor of the Exchequer, have, in the past, all figured as elements in public expenditure. They have all formed part of past deficits, and have all 'been taken account of, as being elements in the deficits of the war years. This money was voted by Parliament. It has not been spent in full. We are recovering it now, exercising great constructive gestures of economies. The Treasury hounds have been hot on the track. This money has all been brought back again, and if it counted as expenditure when it went out, it will surely count as revenue when it comes in again. I do not think there is any way round that. If, therefore, there is anything "phoney" or fictitious, which I deny, in this surplus, there was something equally "phoney" and fictitious in the deficits which were recorded in past years, and none of us have made that charge.
Let me take another simple test. What is the use to which a surplus is put? A true surplus is put to the use of reducing the national debt. I venture the proposition that this surplus £270 million—subject to variations, plus or minus, as the year goes on, but assuming that the surplus turns out to be £270 million and neither more nor less—will be reflected in a comparable reduction in the total of the National Debt. That should give cause for satisfaction to the Opposition. Let me bring it to the sharp test of recent fact. What happened to the National Debt last week? If hon. Members opposite do not remember, let them look up the "Financial Times" of last Wednesday, where it was reported in some detail that what happened last week was that the National Debt was reduced by £139 million. That is a record reduction for any one week, at any rate, within recent memory. Never before under am Government, not even under the great and famous Coalition when the right hon. Member for Bournemouth (Mr. Bracken) and I were in such a happy and harmonious association, has there been a week when the National Debt was reduced by so much as £139 million. Labour gets things done.

Mr. Spearman: With regard to the "clawing back" of this money, which was not going to be spent in any case, how will it achieve the Chancellor's object of reducing the demand for goods and thereby the inflationary effect?

Mr. Dalton: Let me deal with one thing at a time. There is no guarantee that if there had not been a Labour Government it would have been clawed back. I claim the credit, on behalf of my officials, for e this "clawing back" process. Since I have been challenged to reveal to the House private conversations conducted between myself and the Treasury officials, I will say that I did tell my advisers at the Treasury, well in the midddle of the last financial year, that I desired them to show the utmost vigour and energy in recovering unspent funds from all public Departments everywhere. They responded with very great activity and success, as I indicated in my Budget speech. I am dealing now with the reduction of debt. It is not unimportant that we reduced the debt by a record amount last week, and that process is likely to continue. Some people have complained in particular about the size of the floating debt. Some persons in the City sometimes say that the floating debt is too large a proportion of the total debt. In my last Budget speech but one, I said that I was not unduly dismayed by the size of the floating debt, because we were then carrying through the cheap money drive with the object of arriving at a basis of 2½ per cent. longterm. We have got that. Later, we may advance towards other objectives, but at the moment we are consolidating the 2½ per cent. longterm.

Mr. Nigel Birch: The right hon. Gentleman has not got that

Mr. Dalton: If we are in a position to consolidate 2½ per cent. longterm and also gradually to reduce the floating debt through a Budget surplus, then, indeed, we are getting the best of both worlds. and we are very well content Therefore, we have now reached a point where a reduction of the floating debt is a very desirable subsidiary process to what we have been carrying on in the reduction of longterm interest rates. I hope that, by the end of this financial year we shall have seen both a firming-up of the 2½ per cent. longterm rate and also a reduction of the floating debt.

Mr. David Eccles: The Chancellor justified, I think quite reasonably, treating the unspent money returned to the Treasury as revenue because it was first voted by the House of Commons. But if he does that, how can he explain the fact that the E.P.T. re-

payments were treated as revenue when they came in and are to be treated as capital outgoings now? The Chancellor cannot have it both ways. If he wants to be honest over this policy, he must do the same thing in reverse, which he has said he is going to do in respect of this money which has not been spent.

Mr. Dalton: I should be very happy to discuss all these matters with the hon. Gentleman. I am quite prepared to deal with the E.P.T. position, but at the moment I am dealing with what is alleged to be the "phoney" surplus. The E.P.T. money repayments form no part of this, because by a decision of the House the E.P.T. repayments are made after deduction of Income Tax and can be met out of borrowing. That has been decided by the House. I am dealing at the moment with the £270 million surplus, and I am defending the proposition that it is a genuine and proper surplus, and will have the effect of operating to reduce the floating debt and other elements in the National Debt during this year. All these controversies are recurrent. I have cited the Debates in 1921, when Sir Austen Chamberlain defended a very similar claim to what I am defending now against various critics of the Government. I remember similar Debates when I was a junior Member of the House in the days when the present Leader of the Opposition was Chancellor and Lord Snowden, then Mr. Snowden, was leading for the Opposition. We heard it again when those roles were reversed and Mr. Snowden was Chancellor and the right hon. Gentleman the Member for Woodford (Mr. Churchill) was leading for the Opposition. Whenever a Chancellor has produced a surplus the Opposition have always tried to argue it away. It is Parliamentary common form, and therefore it is not to be taken too seriously.
I would like to quote what Sir Austen Chamberlain himself said on this subject, when he was Chancellor of the Exchequer in 1920. replying to Mr. Asquith. He said:
The right hon. Gentleman the Member for Paisley would thus lightly propose the reversal of the whole of our system of public accounts. Would he suggest how I should have accounted for these receipts?"—
those were the same miscellaneous nonrecurring receipts—
—if I had omitted them from the revenue accounts? The system I have pursued is, in


the main, that which is the settled practice of Parliament, and is held to be the Palladium of our financial security and Parliamentary control."—[OFFICIAL REPORT, 21st April, 1920, Vol. 128, c. 443.]
In this matter I can claim to be a better Conservative and a better traditionalist than the Opposition. Seriously, I maintain that these receipts, although many of them come in only once, none the less once they come in are revenue, and they are new money for the Government. They operate to reduce the burden of debt.
Linked with this matter is the allegation that we have reached some kind of bedrock or bottom in the national expenditure. I do not know why the Opposition should think so. It is not based on anything that I have said or that any other Member of the Government has said. On the contrary, we have reduced the total expenditure, as I said in replying to the Debate on the Budget Resolutions, as it was natural and proper that it should be reduced, by 30 per cent. from the wartime peak in the first year. We propose, in this year for which the Finance all makes provision, to bring it down by a further 20 per cent. As my right hon. Friend the Financial Secretary said—he is not here because he has gone to address a National Savings meeting—and as I would like once more to repeat for the benefit of any hon. Members who were not in the House when he spoke—if Table VII (d), page 13 of the Financial Statement be consulted, it will be found that there is a sum on the civil side alone, leaving out the Defence and Supply Departments, of £320 million in our expenditure which is admittedly terminal. It is for the winding up of war services, and is due to disappear in the course of administration this year or next year, whenever it terminates. To this we add £118 million, as the right hon. Gentleman the Member for North Leeds (Mr. Peake) recognised, which is admittedly terminal in the Defence and Supply Estimates. That makes a total of £450 million, and is the minimum of those sums of which we shall see the reduction in the years to come. That is not really bad going.
It is very easy for the Opposition to say "Why do you not save more in this or that direction?" The right hon. Gentleman gave interesting examples, of which I shall not say anything. With regard to economy, the right hon. Gentleman guarded himself, or sought to guard

himself, against being asked exactly what it was that he would economise in. He said that that was not a fair question. He said it was the duty of the Opposition to draw attention to the need for economy in general but that it must not be asked to be too specific. I do not want to press the right hon. Gentleman unfairly of course, particularly so late at night. I remember reading a speech by the Leader of the Opposition at Ayr, where he received the freedom of the burgh in the morning and gave an enthusiastic address at a party gathering in the afternoon. [HON. MEMBERS: "On the following day."] All right. I am not making any complaint about that. I am only trying to separate the two functions. The speech which I am going to cite was the one delivered by the right hon. Gentleman after receiving the freedom. He said we were spending—these are round figures but I will quote his exact words:
£3,000 million in the current year to give us far worse service and conditions than were obtained in the last prewar year under a Conservative Government for only if £1,000 million.
In other words, there is a gap of £2,000 million to be accounted for. The right hon. Gentleman went on to say that of course allowance must be made for the necessary increase in the military forces, the increase of debt charges and the decline in the purchasing power of money. We cannot forget them but we can narrow the field considerably, and I should like to pursue the figures given by the Leader of the Opposition.
It is quite true, as he said, that in round figures, we are spending £3,000 million and that we were only spending £1,000 million in the last prewar year. But we were spending a great deal more in the last prewar year on unemployment. We have achieved a saving of £36 million in unemployment assistance compared with the prewar year, in spite of the decline of the purchasing power of money. It is one of the items for which, on the record of the Tory Party, we should get credit. We are saving nearly £40 million, because men and women are in work and that is more important than some of the minor financial matters we have discussed today. The country is sound when people are at work, and in a rotten state when people are out of work.
I turn from that to the larger items to which the Leader of the Opposition referred. The right hon. Gentleman was


prepared to say that for this purpose the increase in debt charges and the increase in defence charges should be left out of account. The debt charges are up £295 million a year due to the fact that we have had a war. They would have been a great deal more if it had not been for the cheap money policy. Today as things stand they are up by £295 million. Defence is up by £643 million, and thus the two together make, in round figures, nearly £1,000 million, in actual fact £940 million. Therefore out of the £2,000 million increase as compared with the last prewar year, practically half is due to the two factors which the Leader of the Opposition very properly said it was not right to take into account.
The total increase then with which we are charged is £1,000 million. What is it being spent on? The bulk of it is being spent—and later I will take some of the minor points which the right hon. Gentleman mentioned—on carrying out a substantially improved social service programme, on which we fought the last Election and for which the Leader of the Opposition, in another part of the same speech, sought to claim credit for the Opposition. He mentioned the National Insurance Bill, family allowances and the National Health Service as some of the eggs in the Tory basket, and said that all these were hatched out of the Coalition or words to that effect. If that is so, it is not right that we should be blamed for the expenditure which was hatched under the Coalition. I venture to think, as a matter of fact, that the eggs are different in some small degree and that they are better than the public would have got under a Government lead by the right hon. Gentleman. It would be possible to go through the various Departments and show item by item, where we are spending more compared with 1938 and 1939 on various services for the benefit of various sections of our people, whether they be the old people, the sick, or the infirm.
Having made that particular defence, I turn to what was said by the right hon. Gentleman the Member for North Leeds, and at once I not only admit but affirm, that, of course, it is the duty of any Minister who holds office at the Treasury to see that no money is mis-spent. It is also true that he can be much aided by the two Committees of this House whose reports were cited by the right hon. Gen-

tleman. Since I have been challenged as to what I have been doing all this time about making sure that there is a further decline, may I say that I have been urging upon my officials—and hon. Members of this House on those Committees know that this is the case—that the maximum support and assistance should be given, not only to the Public Accounts Committee, who have the Comptroller and Auditor-General to help them, as he does very effectively, but also to the new Estimates Committee. I gave special instructions, as Chancellor of the Exchequer, that this Committee was to be assisted as fully as possible by the Treasury, through the service of skilled officers and others who would help them in their work. That is the way in which the thing has to be done. It ought not to be done by having vague talk about economy, in which nothing is pinned down as to details, but by competent people, Members of Parliament, assisted by friendly advice. Both Committees have the good will of the Government; we read with close attention their reports made from time to time and, so far as their recommendations for reducing expenditure or improving administration are in line with our g objectives, we shall be delighted to act upon them.
That may be productive, as I hope it will be, of quite substantial reductions of expenditure in the future, in directions where such reductions are desirable and proper. But that is a very different thing from a vague economy campaign in general, in which one just says there are too many civil servants, and too much money being spent on this or that public service, without getting anywhere at all. There have been substantial reductions in many branches of the public service since we came in, and I hope there will be others in the future, but I cannot promise as yet any reduction in the Inland Revenue staffs. They do very valuable work, and so do those who are concerned with the other side of the account—namely, collecting the taxes and similar work. We shall, however, always be open to practical and detailed suggestions as to the economies that may be able to be made.
Various points have been put to me about particular items and, as is very natural, a number of hon. Members have referred to the Tobacco Duty. I think I was wise in my Budget speech to keep


that to the last. If I had said anything about it earlier, it would have robbed the sequel of much of its interest. It is now true that other aspects of the Budget speech were rather obscured by a cloud of tobacco smoke in the public mind, but when we come to the Committee stage I am prepared to justify again the imposition of the increased tax. I thought that my hon. Friend the Member for Rotherhithe (Mr. Mellish) made a very well-informed and excellent speech tonight on this matter, and I agree with his remarks. I have the right to speak with the same recent experience because I also happen to have been among my own constituents last week-end, and I found that they, like those of my hon. Friend, fully understand the national reasons why we should reduce the consumption of tobacco.
They also fully understand—and here we must have the Opposition with us—why we do not want to set up any more hordes of officials, offices and forms in an elaborate rationing scheme. We do not want that at all in this connection. What we do want is to have some special provision which I will deal with in a moment in regard to certain hard cases. But my constituents last week-end, like those of my hon. Friend, fully realised that it was a national duty to smoke less. I hope that this rules generally in all parts. It is a national duty to smoke less, and it would be better if people did it in a voluntary fashion, without being regimented to do it. The Opposition were expressing pessimistic views on whether there will be much reduction in the total amount of tobacco being smoked with this new Duty. It is early yet to say. I can only say that in the first weeks there was a very sharp reduction indeed, and that we are well within the target I set in my appeal for a 25 per cent. reduction. There is, of course, the danger that with the passage of time, consumption will creep up but I repeat now, as I shall continually repeat, my appeal to all right-minded and patriotic men and women to help the Government and the nation to save precious dollars. It should be clearly understood that if you spend these dollars on "fags," you will not have them for food, and I appeal to people to face up to their responsibilities in this matter.

Mr. Beverley Baxter: Mr. Beverley Baxterrose—

Mr. Dalton: I remember the point of the hon. Member. He, of course, is a

member of a co-operative society. He is rather disturbed to receive dividends—on purchases, dating back some time—on what he was spending on "fags," before my Budget speech, and he is hoping that in future his society and others, will discontinue the dividends on purchases in respect of tobacco. This is a matter which each co-operative society must decide for itself, and the hon. Gentleman will be able to go to his quarterly meeting, and deal with the matter there.

Mr. Baxter: Does the Chancellor think that this practice is fair? Is it not directly antagonistic to his purposes? At the present moment I can go to my tobacconist and purchase a packet of cigarettes for 3s. 4d. I can then join a co-operative society, cross over the road, and pay 3s. 4d. for a packet of cigarettes. My income and my status are the same, but in the second case I can with a 2s. dividend get 4d. back, if the particular society happens to be paying that dividend. I say that it is a direct contradiction of what the Chancellor of the Exchequer intends, and should be stopped.

Mr. Dalton: The hon. Member had better join a number of different cooperative societies, and compare their practices, because my information is that the practice differs considerably, not only in regard to the amount of dividend, but in regard to the range of purchases on which the dividends are paid. The cooperative societies are in a democratic movement, and they settle their own affairs for themselves. It is not for me to lay down the rules upon which they should calculate their dividends. But I make my appeal, and I make it confidently, to all co-operators, as I do to the rest of the community, to reduce their smokes. I do not think that the point which the hon. Member raises is a fundamental one. It is a question of how a particular society conducts its affairs. I urge co-operators, as I urge everyone else, to reduce their smoking by at least 25 per cent., and I am confident that they will do it.
In regard to the old people, I have asked my officials at the Treasury to consult with the officials of the other Departments who will be primarily concerned—the Ministry of National Insurance are very much concerned in the matter—to try to work out for me, as watertight and as administrable a scheme


as they can. We have had conversations with regard to the possibility of exempting a number of the older people from the payment of this tax, at any rate on a weekly allocation of tobacco. It is not so easy to work out as might at first be thought. None the less, I have told my officials and my colleagues, who are in agreement with me, that we must do our very best—that we must do all we can—to get a scheme which will hold water, and which cannot be broken down by abuse, or by ill-intentioned people. I hope, therefore, in the Committee stage, to put down a new Clause whereby something along these lines may be accomplished.
The matter is being approached with the greatest good will of all concerned. This is not the kind of thing we can do easily. I do not wish to conceal from the House that, from an administrative point of view, it is a difficult question. It is not the kind of thing one can do at ten minutes' notice, and I must tell the House that it must not be regarded as a precedent for future action in other cases. But I will do my best, on the Committee stage, to produce a workable scheme. I would rather not say any more tonight. I am not prepared to give details at this stage. I hope that, with that, the hon. Member for Cheltenham (Mr. Lipson) who gave a kindly thought to the Budget, and other hon. Members, will be satisfied, and that we can devise something of this kind. I hope it will be realised that there is nothing harsh nor unjust about this tax. The Jarrow electors did not believe there was, although they were told that there was, I believe, in a communication from the Conservative Party.
I turn to the dollar imports. They are, of course, a most serious anxiety at this moment, and hon. Members will recall that, in my Budget speech, I spoke clearly on that subject. I said that, compared with the anxiety of the overseas trade deficit, all domestic problems, serious though they are, become relatively easy. This is the problem which is the most serious of all, and we are giving constant attention to it. There is seldom a day on which this thing is not examined, or action prepared, and this is not the last step which will have to be taken to reduce the dollar drain. There are other points which have been raised, but some of

these are of the kind which cannot easily be fitted into discussion on any Finance Bill, and, apart from the wide, general field, they are not things which can be implemented in a Finance Bill.
A number of hon. Members, including some on this side of the House, raised a number of questions, which, if I may express the view, it will be better to raise on the Committee stage. One question, which will not come up on Committee stage, was raised by my hon. Friend the Member for North Portsmouth (Major Bruce). This was the question of co-partnerships and the Stamp Duty on bonus issues. I would state that these will be exempted, because it is not intended that co-partnerships shall be under the provisions of this duty. The hon. and gallant Member also asked for consideration of a tax on capital appreciation. The answer is that I do not want too many new taxes. I spoke my mind on that point in my Budget speech. It all means new offices, and new staff, and new apparatus. Even though the burden of taxation might be thought by some to be heavy, it is much better that the taxes should be few and strong. I am prepared to back our existing system with a powerful, well-administered Surtax on the larger income groups, on Death Duties, on certain Customs and Excise Duties, and upon Profits Tax. I do not want to add a new tax just for the fun of it. We may arrive at a state of affairs following the cheap money drive where there will not be a very wide variation in the future in capital values. We will continue to watch this possibility.

Mr. I. J. Pitman: Would the Chancellor before he leaves that point clear up the question of co-partnership shares issued to workpeople. It seems to me—

Mr. Dalton: It is not intended that the Stamp Duty should fall upon those co-partnership shares. Perhaps we can pursue that better in Committee. It is not intended that they should be subject at all to this tax.

Mr. Pitman: It was said that it could not be raised in Committee.

Mr. Dalton: I said that the Bill did not impose a duty in terms, upon these co-partnership shares, and that particular matter will not need to be raised in Committee. Any further questions on the definition of this duty and what is subject


to it, can, of course, be raised in relation to the terms of the Clause in the Bill dealing with it. Several of my hon. Friends have referred again to the rating of land values. I made the Government position quite clear on that subject a year ago. There will be legislation some time. We cannot tell exactly when, but within the life of this historic and vital Parliament, it is probable that legislation will be brought in dealing with various matters relevant to valuation, rating, and kindred topics. There will naturally be a place for discussion of the topics raised by my two hon. Friends, but this is primarily a responsibility of my right hon. Friend the Minister of Health. It would be proper I think if my right hon. Friend entered into discussions with me on this matter. I would be most responsive, most interested. I cannot say in advance, what line he will take, but on the broad picture painted last year such a proposal might fit into the general pattern of a report on the rating system. It cannot belong to the Finance Bill because we are not going to embark at this stage on a national valuation for national taxation on land values. But it does not exclude the possibility of such local authorities as wish to do so, considering matters in relation to land values within their areas. I cannot go further than that, but I hope that what I have said will not be thought discouraging. A number of other points were made. The hon. Member for East Ealing (Sir F. Sanderson) gave me very good support, and I hope that after that speech he will go into the Lobby with us. He gave an admirable series of arguments in favour of the Finance Bill.
Just what does the Bill seek to do? We regard it as the third of a series, and I think it will be conceded- that through the Budgets and Finance Bills which have been introduced by this Government with its Parliamentary majority to carry them through, there has been running a certain thread which is to be found also in this Bill.—[An HON. MEMBER: "Class warfare."] Class warfare? Well, we can take some lessons from past history in that matter. But it will be found that through these Budgets and Finance Bills there runs the theme, first of making provision in the Budget for the necessary public services, social services and the like. Here I accept the distinction which the right hon. Gentleman the Member for North Leeds quoted from me. We believe

we should press forward with these schemes of improvement, even though to do so, means that the general level of taxation will be higher. That is the view we hold. There is the other view, that you should postpone improvements until the level of taxation is lower. That view we do not accept. There must be sufficient revenue to provide for the necessary public services including great schemes of social improvement.
We say, also, that as soon as we are through the aftermath of war—and we are pretty well through it now, in terms of finance—we must have a scheme whereby we balance the Budget over a period of years; not each year, but over a period of years. I say that this year has been a good year to balance the Budget, due to the fact that prices have shown an upward tendency, and there has been full employment. In every respect, it is a year for a surplus rather than a deficit. That will entitle us with a clear conscience and in honesty to carry through our doctrine to provide, if need be, for a deficit to carry us through difficult times. We raise the revenue by adjusting the existing taxation system in such a way as to put the biggest burden on the broadest backs, and relieve the poorer people increasingly of the burden of taxation which they carried through the war years. It will be seen if the three Budgets are taken together, that the cumulative effect of the changes we have made in regard to Income Tax, the earned income allowance, the child allowance—which we are increasing this year and which the Opposition is going to vote against—and in regard to dependent relative allowances, and the payment of postwar credits to old people—which are also being opposed by the Opposition—all these things are improvements whereby we adjust the burden in such a way that the poor shall pay less and the rich shall pay at any rate no less until the poor have been sufficiently relieved. Even so, the very highest incomes have had increment under this Government. We are a National Government assuredly. A man with £100,000 a year is £300 a year better off. This is a Government behind which all grateful taxpayers rally unitedly.
We shall continue along these same lines. We shall shift the burden from the poorer to the richer, from the active element to the passive element. That is what earned income relief means. That is relief


on income which is earned, as compared with income which flows in while you sleep. We shall continue tilting the balance in favour of income which flows from exertion. With regard to Death Duties, we are taxing the poor less and the rich more as they take wings and fly on. In every other section in which you choose to examine details, there is an equalising tendency and an approach towards social justice and towards the proper adjustment of taxation of economic functions, whether active or passive. These trends will be continued whoever may be Chancellor of the Exchequer in this Parliament,

so long as this majority here at Westminster carries out the principle on which we fought and won the last Election. The broad principles are, I hope, clear and I believe so clear that the evidence is that the people have accepted them and have no desire to go back to the bad old days. I say to the Opposition: Go into the Lobby and vote against all these benefits, and we shall take care that your bad deed tonight is not forgotten.

Question put, "That the Bill be now read a Second time."

The House divided: Ayes, 274; Noes, 128.

Division No. 216.]
AYES
[10.48 p.m


Adams, W T (Hammersmith South)
Davies, Clement (Montgomery)
Jeger, G. (Winchester)


Alexander, Rt. Hon. A. V.
Davies, Edward (Burslem)
Jeger, Dr. S. W. (St Pancras, S.E.)


Allen, A. C. (Bosworth)
Davies, Harold (Leek)
Jones, D. T. (Hartlepools)


Allen, Scholefield (Crewe)
Davies, Hadyn (St Pancras, S.W.)
Jones, Elwyn (Plaistow)


Alpass, J H.
Davies, R. J. (Westhoughton)
Jones, J. H. (Bolton)


Anderson, F. (Whitehaven)
Deer, G.
Jones, P. Asterley (Hitchin)


Attewell, H. C.
Delargy, H. J
Keenan, W.


Attlee, Rt. Hon. C. R
Diamond, J.
Kendall, W. D


Austin, H. Lewis
Dabbie, W.
Kenyon, C.


Awbery, S. S
Dodds, N. N.
Key, C. W


Ayles, W. H.
Donovan, T.
King, E. M.


Ayrton Gould, Mrs B
Driberg, T. E. N.
Kinghorn, Sqn.-Ldr. E.


Bacon, Miss A
Dugdale, J. (W. Bromwich)
Kirby, B. V.


Baird J.
Durbin, E. F. M.
Lang, G.


Balfour, A
Ede, Rt. Hon. J. C
Lee, F. (Hulme)


Barstow, P. G
Edelman, M.
Lee, Miss J. (Cannock)


Barton, C.
Edwards, N. (Caerphilly)
Leonard, W


Battley, J. R
Evans, S. N. (Wednesbury)
Leslie, J R.


Bechervaise, A. E
Ewart, R.
Lever, N H


Benson, G.
Fairhurst, F.
Levy, B. W.


Berry, H.
Farthing, W. J.
Lewis, A W. J. (Upton)


Beswick, F.
Fernyhough, E.
Lindgren, G. S.


Bing, G. H. C.
Field, Capt. W. J.
Lindsay, K. M. (Comb'd Eng Univ.)


Blackburn, A R
Fletcher, E. G. M. (Islington, E.)
Lipson, D. L.


Blenkinsop, A
Follick, M
Lipton, Lt.-Col [...]


Blyton, W. R
Foot, M. M.
Lyne, A. W.


Bottomley, A. G.
Gaitskell, H. T. N
McAdam, W


Bowden, Flg.-Offr. H. W.
Gallacher, W
McGhee, H. G.


Bowles, F. G. (Nuneaton)
Ganley, Mrs C. S
McKay, J. (Wallsend)


Braddock, Mrs. E. M. (L'pt, Exch'ge)
George, Lady M. Lloyd (Anglesey)
McLeavy, F.


Braddock, T. (Mitcham)
Gibson, C. W
Mallalieu, J. P. W


Bramall, E. A.
Glanville, J. E. (Consett)
Mann, Mrs. J.


Brook, D (Halifax)
Goodrich, H. E.
Manning, C. (Camberwell, N.)


Brooks, T. J. (Rothwell)
Gordon-Walker, P. C
Manning, Mrs. L. (Epping)


Brown, George (Belper)
Greenwood, A. W J (Heywood)
Marquand, H. A.


Brown, T. J (lnce)
Grenfell, D. R
Marshall, F. (Brightside)


Bruce, Maj. D. W. T.
Grey, C. F.
Medland, H. M


Buchanan, G.
Grierson, E.
Mellish, R. J.


Burke, W. A.
Griffiths, D. (Rother Valley)
Middleton, Mrs. L


Butler, H. W (Hackney, S.)
Griffiths, Rt. Hon. J (Llanelly)
Mikardo, Ian


Byers, Frank
Guest, Dr. L. Haden
Mitchison, G. R


Castle, Mrs. B. A
Guy, W. H.
Monslow, W.


Champion, A J
Haire, John E. (Wycombe)
Moody, A. S.


Chater, D
Hamilton, Lieut.-Col. R
Morgan, Dr, H. B


Chetwynd, G. R.
Hannan, W. (Maryhill)
Moyle, A.


Clitherow, Dr. R.
Hardy, E. A.
Nally, W


Cobb, F A.
Hastings, Dr. Somerville
Neal, H. (Claycross)


Cocks, F. S
Henderson, A. (Kingswinford)
Nichol, Mrs. M. E (Bradford, N.)


Coldrick, W.
Henderson, Joseph (Ardwick)
Nicholls, H. R (Stratford)


Collindridge, F.
Hobson, C R.
Noel-Baker, Capt F E (Brentford)


Collins, V J
Holman, P.
Oldfield, W. H


Colman, Miss G M
Holmes, H. E. (Hemsworth)
Oliver, G. H


Comyns, Dr. L.
Hoy, J
Orbach, M


Cooper, Wing-Comdr. G.
Hudson, J. H. (Ealing, W.)
Paget, R. T.


Corbet, Mrs. F. K (Camberwell, N.W.)
Hughes, Hector (Aberdeen, N.)
Paling, Rt Hon. Wilfred (Wentworth)


Corlett, Dr. J
Hynd, H. (Hackney, C.)
Paling, Will T. (Dewsbury)


Cove, W. G
Hynd, J. B. (Attercliffe)
Palmer, A. M. F


Drawley, A
Irving, W. J
Pargiter, G. A.


Daggar, G
Janner, B.
Parkin, B. T


Dalton, Rt. Hon H.
Jay, D. P. T.





Paton, Mrs. F. (Rushcliffe)
Skeffington, A. M.
Viant, S. P.


Paton, J. (Norwich)
Skeffington-Lodge, [...] C
Wadsworth, G.


Pearson, A.
Skinnard, F. W.
Walker, G. H.


Peart, Capt T. F.
Smith, Ellis (Stoke)
Wallace, G. D. (Chislehurst)


Platts-Mills, J. F. F
Smith, S. H (Hull, S W.)
Wallace, H. W. (Walthamstow, E.)


Porter, G. (Leeds)
Snow, Capt. J. W
Warbey, W. N.


Price, M. Philips
Solley, L. J
Weitzman, D.


Pritt, D. N.
Sorensen, R. W
Wells, W. T. (Walsall)


Proctor, W. T.
Soskice, Maj. Si[...]
West, D. G.


Pryde, D. J.
Sparks, J. A
White, C. F. (Derbyshire, W.)


Pursey, Cmdr. H
Stamford, W
White, H. (Derbyshire, N.E.)


Randall, H. E.
Steele, T.
Whiteley, Rt. Hon. W


Ranger, J.
Stokes, R. R
Wigg, Col. G. E. 


Rees-Williams, D. R
Strachey, J.
Wilkes, L.


Reeves, J.
Stross, Dr. B
Wilkins, W. A


Rhodes, H.
Stubbs, A. E.
Willey, F. T. (Sunderland)


Richards, R
Swingle, S.
Willey, D. G. (Cleveland)


Robens, A.
Sylvester, G. O
Williams, D. J. (Neath)


Roberts, Emrys (Merioneth)
Symonds, A. L.
Williams, W. R. (Heston)


Roberts, Goronwy (Caernarvonshire)
Taylor, H. B. (Mansfield)
Williamson, T


Robertson, J. J. (Berwick)
Taylor, R. J. (Morpeth)
Willis, E.


Rogers, G. H. R.
Taylor, Dr. S. (Barnet)
Wills, Mrs. E. A


Ross, William (Kilmarnock)
Thomas, D. E. (Aberdare)
Wise, Major F. J


Sargood, R
Thomas, Ivor (Keighley)
Woodburn, A.


Scollan, T.
Thomas, I. O. (Wrekin)
Woods, G. S


Scott-Elliot, W
Thomas, George (Cardiff)
Yates, V. F.


Segal, Dr. S.
Thorneycroft, Harry (Clayton)
Young, Sir R. (Newton)


Shackleton, E. A. A
Thurtle, Ernest
Younger, Hon. Kenneth


Sharp, Granville
Titterington, M, F.
Zilliacus, K.


Shawcross, Rt. Hn. Sir H. (St Helens)
Tomlinson, Rt. Hon G



Silverman, J, (Erdington)
Turner-Samuels, M.
TELLERS FOR THE AYES:


Silverman, S S. (Nelson)
Ungoed-Thomas, L.
Mr. Michael Stewart and


Simmons, D. J.
Vernon, Maj. W. F
Mr. Popplewell.




NOES.


Agnew, Cmdr. P. G.
Gates, Maj. E. E
Morrison, Rt. Hon. W. S. (Cirencester)


Allen, Lt.-Col. Sir W. (Armagh)
Gridley, Sir A.
Mott-Radclyffe, Maj. C. E.


Amory, D. Heathcoat
Grimston, R. V.
Neven-Spence, Sir B.


Anderson, Rt. Hn. Sir J. (Scot. Univ.)
Hannon, Sir P. (Moseley)
Nicholson, G.


Assheton, Rt. Hon. R.
Hare, Hon. J. H. (Woodbridge)
Nield, B. (Chester)


Astor, Hon. M.
Head, Brig. A. H.
Noble, Comdr. A H. P.


Baldwin, A. E.
Headlam, Lieut.-Col. Rt. Hon. Sir C.
Nutting, Anthony


Baxter, A. B.
Henderson, John (Cathcart)
O'Neill, Rt. Hon. Sir H


Beamish, Maj. T. V. H
Hinchingbrooke, Viscount
Peake, Rt. Hon. D.


Bennett, Sir P.
Hogg, Hon. Q.
Peto, Brig. C. H. M


Birch, Nigel
Holmes, Sir J. Stanley (Harwich)
Pickthorn, K.


Boles, Lt.-Col. D. C. (Wells)
Hope, Lord J.
Pitman, I. J.


Bossom, A. C.
Howard, Hon. A.
Prescott, Stanley


Bower, N.
Hudson, Rt. Hon. R. S. (Southport)
Ramsay, Maj S.


Boyd-Carpenter, J. A.
Hulbert, Wing-Cdr. N. J.
Reed, Sir S. (Aylesbury)


Bracken, Rt. Hon. Brendan
Hurd, A.
Reid, Rt. Hon. J. S. C. (Hillhead)


Braithwaite, Lt.-Comdr. J. G.
Hutchison, Lt.-Cm. Clark (E'b'rgh W.)
Roberts, H. (Handsworth)


Bromley-Davenport, Lt.-Col. W
Jeffreys, General Sir G
Ropner, Col. L.


Carson, E.
Kerr, Sir J Graham
Sanderson, Sir F.


Channon, H.
Kingsmill, Lt.-Col. W. H
Shephard, S. (Newark)


Clarke, Col. R. S
Lambert, Hon. G
Smithers, Sir W.


Clifton-Brawn, Lt.-Col. G
Lancaster, Col. C G.
Snadden, W. M.


Conant, Maj. R. J. E.
Langford-Holt, J.
Spearman, A. C. M.


Corbett, Lieut.-Col. U. (Ludlow)
Law, Rt. Hon. R. K.
Strauss, H. G. (English Universities)


Crookshank, Capt. Rt. Hon H. F. C.
Legge-Bourke, Maj. E. A. H
Stuart, Rt. Hon. J. (Moray)


Crosthwaite-Eyre, Col. O E
Lennox-Boyd, A. T.
Studholme, H. G.


Crowder, Capt. John E.
Lloyd, Selwyn (Wirral)
Sutcliffe, H.


Cuthbert, W. N.
Low, Brig. A. R. W
Taylor, C. S. (Eastbourne)


Darling, Sir W. Y.
Lucas, Major Sir J.
Taylor, Vice-Adm. E. A. (P'dd't'n, S.)


Davidson, Viscountess
Lucas-Tooth, Sir H.
Testing, William


Digby, S. W.
Mackeson, Brig. H. R
Thomas, J. P. L. (Hereford)


Dodds-Parker, A. D.
Maclay, Hon. J. S.
Thornton-Kemsley, C. N.


Donner, Sqn.-Ldr. P. W.
Macmillan, Rt. Hon. Harold (Bromley)
Thorp, Lt.-Col. R. A. F.


Dower, E. L. G. (Caithness)
Maitland, Comdr. J. W.
Walker-Smith, D.


Drayson, G. B.
Manningham-Buller, R. E
Ward, Hon. G. R.


Dugdale, Maj. Sir T. (Richmond)
Marlowe, A. A. H.
Wheatley, Colonel M. J.


Duthie, W. S.
Marples, A. E.
White, J. B. (Canterbury)


Eccles, D. M.
Marsden, Capt. A.
Willink, Rt. Hon. H. U.


Eden, Rt. Hon. A.
Marshall, D. (Bodmin)
Willoughby de Crosby, Lord


Fleming, Sqn.-Ldr. E. L.
Maude, J. C.
Winterton, Rt. Hon. Earl


Fraser, H. C. P (Stone)
Malson, A. H. E.
TELLERS FOR THE NOES


Fracer, Sir I. (Lonsdale)
Moore,-Lt.-Col. Sir T.
Mr. Buchan—Hephurn and


Fyfe, Rt. Hon. Sir D.P.M.
Morris-Jones, Sir H.
Mr. Drewe.


Gage. C.
Morrison, Mai. J. G. (Salisbury)

Bill accordingly read a Second time, and committed to a committee of the House.

Committee upon Thursday

Orders of the Day — SERVICE PRISONERS, SINGAPORE (CONDITIONS)

Motion made, and Question proposed; "That this House do now adjourn."—[Mr. Simmons.]

10.57 p.m.

Mrs. Braddock: I am in a difficulty. I have been informed only within the last two hours that the Secretary of State for War is not taking any responsibility for answering on the matter I intend to raise and that it has been passed to the Colonial Office. I had no intimation that the Colonial Office had anything to do with the question but, perhaps, that can be explained by the Under-Secretary of State for the Colonies when he replies. I wish to bring before the House the question of the conditions under which Services' personnel are serving sentences in the Singapore prison. My attention was drawn to it by a letter, which was, admittedly, smuggled out of the prison. On reading certain items in that letter, and knowing that some of the personnel concerned were men from Liverpool, I was much concerned with the position. Perhaps I can best put the position by reading certain quotations from the letter which I have received. It is dated 19th February, and states:
The boys want the public to know under what conditions the British service man is living under, here in Singapore. In here at present there are a few Liverpool boys, and there are others who have preceded them …There are altogether about a hundred Servicemen from all parts of England, on charges which they say should never have been put in prison for, serving as much as three to four years' imprisonment and most of them have served for two years or more out here in the Far East, mostly as occupation forces. If these boys were tried in a proper police court in England they would no doubt be given a fine but decidedly not given a prison sentence. The majority of the boys are in here on a charge of being in possession of arms, there are various other charges such as black market, etc. If a Serviceman is found with a few rounds of ammunition in his kit, which he invariably has, his officer turns him over' to the civilian police and they in turn sentence him to three or more years imprisonment.
The letter refers to this place as "a second Belsen," and says that in this place are the men who fought during the war. The letter continues:
There is also the matter of lawyers here. Firstly, the Services will not provide us with a defending counsel. Even if we are lucky and manage to retain a Services' officer as a defending counsel, we are told to plead

guilty, and throw ourselves on the mercy of the court, the jury consisting of seven Chinese and one Tamil, who said that we should get the highest punishment even before we appeared in court. We are advised to retain a civilian lawyer, which we have to pay for ourselves and draw the money from our gratuities. The Services do not help us to pay for these lawyers, but the Japanese prisoners of war are given legal aid, and a fully-qualified lawyer is paid for by the British Government, and they also have the opportunity of being released.
This letter also states:
It is said in the papers that the police force are bribed to keep their eyes closed to certain things. If you pay a police inspector £250, he will see nothing, and you will remain scot free, but where can an ex-Serviceman get that amount of money to bribe an officer of the law (so-called)? Even in appearing at court, we are ushered in with a crowd of dirty Indians, Malays and Chinese, and placed in a small dock to await the arrival of the judge, who enters at a time convenient to himself. We have never heard a word from him, except a grunt, a stamp and signature on a warrant, and then brought back to this Belsen for another week. This goes on for a month at a time, and there is no heed paid to the amount of time we stay in remand… We prisoners are taking a great risk in sending this letter to you, as it has to be smuggled out of the prison… We are herded into a cell about 30 ft. by 12 ft., in which 17 people have to sleep. The blankets are infested with bugs and lice, and the beds are three wooden boards with two wooden trestles, also infested with bugs.
They go on, in this letter, to make reference to the conditions of medical treatment in the prison. This letter caused me to put down Questions on the Order Paper, to which I have received no replies whatever from the War Office, although, when I put down the Question, I sent to the War Office the letter from which I have quoted. The information contained in the letter should have enabled them to provide an answer one way or another. The whole letter was actually sent to the War Office, and, for a long time, I heard nothing at all. I then received further letters, both from the civilian remand gaol, a different place from the Singapore civil prison from which the first letter came. These letters say that, following my question in the House, they had a visit to the prison. They say:
We want to tell you that we were awakened in the morning and told that we had to clean up our cells and tidy up everything in general, as a person of importance was to visit the prison. Not one of the men was informed who was coming until there appeared somebody in khaki uniform, but even the most observant man in the cells was quite unable to see him long enough to recognise any badge of rank or any of his features. This person was


the Major-General of Singapore, but he never made any comment but turned his back and went away. When we told him that we wanted to give him some information, he said that he had not sufficient time.
This letter contains serious allegations with regard to the medical conditions at the prison, and it is one which causes me very great concern, because it says:
One man requested to see the doctor about a suspected case of venereal disease, and the doctor told him he would soon be going outside and therefore didn't need the prison's medical supplies, which, according to the medical orderly, the prison had to pay for. Only in exceptional cases will the patient be treated twice a day. Anybody suffering from mosquito or insect bites got no attention at all when they asked for medical treatment.
They say that when they went out on the Sunday morning to go down to the toilet, they were confronted by about 30 Chinese, all suffering from skin disease, bathing and washing their clothes in the same water as they had to use. Another point which they consider important is that they are not allowed to go to any church, and they complain that the inspector of prisons flatly refused to consider all communications made with reference to this matter. Following that, I saw the Secretary of State for War and was told that some inquiries were being made, but that the War Office were waiting for a report from Singapore. I received a letter on the morning that I asked my second Question—why my first had not been answered—which gave some information. Perhaps it would be better if I read to the House this letter the contents of which are totally unsatisfactory. It is from the Secretary of State for War and is dated 21st April. It says:
On 11th March I promised to write to you when I received a report from Singapore about the Outram Road civilian prison. I am now able to let you have a reply which also covers your letter to me of the 18th March with its enclosure. The civil authorities in Singapore will not allow soldiers sentenced in civil courts to serve sentence anywhere but in civil gaols. The majority of sentences for which the men are convicted are armed robbery and illegal possession of firearms, both of which the civilian government are striving to suppress. It follows that the military authorities exercise no responsibility over such Army personnel while they are under sentence. For a time, owing to lack of accommodation in military prisons, some soldiers sentenced by court-martial had also to be confined in the civilian prison at Singapore. While these men were in civil custody our responsibility was limited to a review of their sentences. On 18th March there were 13 English Army personnel in Outram Road remand prison and 24 in the Outram Road main gaol. Soldiers tried by the

Civil courts for civil crimes cannot be represented by Service personnel, but all cases deserving of legal aid, i.e., broadly speaking, cases equivalent to those in which legal aid would be granted by the civil courts in this country, are now referred to War Office to obtain approval for the employment of civil counsel at Government expense.
I cannot understand where the difference comes in, or how it is sorted out. The last paragraph is most interesting. It says;
With regard to the general conditions in this prison, I am hoping to receive some information on feeding, sanitary and other conditions from my representative who is now touring the area and is to visit the gaol by courtesy of the Inspector of Prisons, Singapore. I will write again when I have seen his report.
That, of course, suggested to me that the War Office were responsible for this matter. I was somewhat surprised to learn, as I said in my opening remarks, that the War Office were taking no responsibility and that nobody was coming here to say anything about it, and that the whole responsibility in the matter was being put on to the Colonial Office. Had I known that that was the position, or had I been communicated with before this, I might have been saved the necessity of raising this matter tonight, in an endeavour to get some information, and could have passed my correspondence to the Colonial Office instead of having to raise it now.
Finally, as to the letter from the Secretary of State for War, although, evidently, he could not tell me, or has not told me up to now, the result of the inquiry which was made on his instructions in Singapore, I can yet get a letter from the men themselves telling me exactly what happened when the visit was made, and what the position was in relation to that visit. I received further information which caused me very grave concern when I read it. It said:
The governor of this place takes a sadistic delight in using a thing call the rattan as a means of punishment on, the slightest provocation. The nearest thing that describes it is a cat o' nine tails, which I believe is abolished in England. This instrument was used on a Service person, and left his body horribly marked for months after.
When one receives letters of this sort from Service personnel who fought during the war, and are in prison far away from their own homes, without any supervision and with no one to take up their case unless they are able to smuggle a letter


such as I have read from prison, one thinks that it is about time that whatever Government Department is responsible knew something about what is happening to our lads spread over the earth.
Following my Question about the troops, I received a letter from a Service man's mother in Bradford, in which she told me that her son had been in prison and had received treatment similar to that which I have recounted to the House. In fact, some of the comments made led me to believe that the letters I have received do not give the full facts of what is happening to our lads who are prisoners in civilian or military gaols. This is a matter which affects the wives and mothers of Service personnel, and there should be some way for these people to find out what is going on and what is happening to their menfolk. I see no reason to believe that these are not genuine letters. They are intelligently written, and they seem to have been written under a great deal of stress. Also, they had to go to a lot of trouble in order to find somebody who was prepared, in the first instance, to smuggle the letter out of prison. When the Under-Secretary of State for the Colonies replies I hope he will let me know how it is that there has been a change in the Department responsible for this matter since I put down my first question in February. I received a reply to one of my letters from the War Office on 21st April, and although I have requested information since it was only very recently that the Colonial Office told me that they were responsible. This shifting of the matter from one Department to the other, is not in the interests of the men or their relatives, and I should like to know which Department is responsible.

11.14 p.m.

The Under-Secretary of State for the Colonies (Mr. Ivor Thomas): I am sorry that my hon. Friend the Member for the Exchange Division of Liverpool (Mrs. Braddock) has been disappointed in the Minister whom she expected to reply but I must do the best I can to answer her questions. The question she has raised is about members of the Forces who have committed civil offences and are in a civil prison under the control of the government of Singapore. She will see that it was not clear which Department was responsible for the reply and we could not anticipate her speech. Now that I have

heard her speech I am reinforced in my view that the Colonial Office is the proper Department. The only question which I do not feel is within my competence is the question of legal aid to the prisoners at the time of their trial, and I will ask my hon. Friend the Financial Secretary to the War Office if he will provide a reply in writing to that question. If there is any criticism of the fact that I am speaking here tonight, I take the responsibility. After discussions with my hon. Friend the Financial Secretary to the War Office, I felt that the charges were for my Department to answer. I admit at once that, in one respect, the conditions in this prison in Outram Road, Singapore, are not satisfactory. The hon. Lady has quoted the expression "Belsen," and that is, of course, a complete exaggeration. The respect in which I admit that conditions are bad is overcrowding. There were, at a recent date, 82 Europeans, including 66 members of the Armed Forces, in the European quarters of this prison, which were built over seventy years ago and which, before the war, normally accommodated twenty persons. The reason for this increase is in the first place the big increase in the Armed Forces in Malaya, and the prevalence of crime by members of the Armed Forces as well as by civilians in Malaya. Another cause of this overcrowding is that the other gaol in the colony, the Changi Gaol—of infamous memories under the Japanese—is now used to accommodate Japanese war criminals. 1t is the policy of the Government that war criminals should so far as possible serve their sentences where their crimes were perpetrated, and so this other building is not available for prisoners convicted of civil crimes. These are the reasons why there is overcrowding, and before long I will mention what we are proposing to do to remedy this position.
The hon. Lady has also made allegations about the inadequacy of the medical treatment in the prison. I can tell the House that in the very full information I have received about conditions in the prison I have found no evidence to support what she has said on this subject. Naturally, I will have the fullest inquiry made into the matter now that the hon. Lady has raised it, but I shall be surprised if it is found that matters are as she has stated, or that in such questions as she has mentioned the medical autho-


rities are not very careful indeed. The hon. Lady has also made reference to church services. It is true that, on Christmas Day, when a number of prisoners asked for the ministrations of the clergy, it was not possible to find a clergyman as the clergy had so many other duties that day. But a Chaplain to the Forces regularly attends the prison and services are held regularly.
I have mentioned that there is at present overcrowding in the prison, but it is hoped that this wave of crime is not permanent. I ought to interpolate that these prisoners are not serving sentences for light offences. My hon. Friend has mentioned that some are being punished for the possession of arms, but the possession of arms is not a light matter in Singapore at the present time. There is a wave of serious crime in the colony, and many of the prisoners are serving sentences for armed robbery with violence. I have no reason to doubt that 'the administration of justice in their case was as careful as in all cases.

Mr. Pritt: Why, when it is almost a universal practice to bring Europeans, who have been sentenced to long periods, back to this country, is not the practice followed here?

Mr. Thomas: If the hon. and learned Member had waited for just two more sentences, he would have found that was a solution to which I was going to refer.
We cannot contemplate the building of additional prisons in Singapore. We hope that the present large number of prisoners is a temporary phenomenon. The building problem in Singapore—there was much damage during the war—is extremely serious. We cannot build additional prisons. What we do propose, on the recommendation of the Governor of Singapore—who has himself visited the prison—is that we should take advantage of the Colonial Prisoners Removal Act of 1884 which, in Section Two, provides that where members of the Armed Forces are imprisoned abroad they may be brought to this country to serve their sentence. The Governor recommends that after European prisoners have served twelve months of their sentence they should be brought to the United Kingdom to serve the remainder and my right hon. Friend has accepted the recommendation in principle.

It remains to be seen, of course, whether there is accommodation in this country for such prisoners, and the question of their transport will also give some difficulty. But in principle the suggestion has been accepted. Its detailed application will be followed out in discussions with the Home Office and other interested departments. I trust therefore that my hon. Friend will see that we are concerned about the question of overcrowding, and as for the other points that have been raised, although I have no reason to think that the hon. Lady's information is correct, I will bring them to the notice of the proper quarters.

Dr. Morgan: Will the hon. Gentleman address his attention to the alleged use of a whip as a weapon of punishment on the prisoners? It is shocking and illegal if such a weapon were used.

Mr. Thomas: I cannot make any comment on a statement quoted by the hon. Lady from a letter. That is one of the matters which I will certainly bring to the notice of the Governor of Singapore.

Captain Marsden: ; The hon. Lady has given us a great many complaints against the treatment of prisoners. I hope that she will not forget that there is a great deal of feeling against the crimes these men have committed. There is one point with regard to the question of these men being represented in court. When a naval rating goes before a civil court, an officer in the ship in which the man serves goes to the court and watches the case and reports if he thinks there has been a fair trial or otherwise. Can the Under-Secretary give us any information to show that these men, when before a civil court, got any help in the matter of representation, or whether anyone watched their interests? I think that is a question we should ask.

Mr. Thomas: That is a question for the War Office, as I said at the beginning of my speech.

11.24 p.m.

Dr. Haden Guest: My only excuse for intervening is that I was closely in touch with the authorities at Singapore, and I know the Governor personally. I feel that a little first-hand evidence may be of use. There is a lot of violence in Singapore, and a very un-


healthy state of affairs. That violence must be dealt with by severe punishment. When there are cases of people being held up in the streets, and cases of robbery with violence, and so on, it is necessary to take steps to deal with them effectively. Whether the man should be represented by lawyers at his trial, is a matter of which I do not want to speak, but with regard to the suggestions almost of inhumanity and neglect against the medical services, I frankly do not believe that of the medical services in Singapore. I was in contact with the heads of the Colonial Medical Service and others who seemed to me to be extremely conscientious, and trying to carry out their work in very difficult circumstances. The same applies to the Service personnel, the Navy, the Army, and the Royal Air Force. Why these men were not represented from the legal point of view in court is a matter which is not, as I say, within my field, and I do not wish to comment on that. But I think the picture which has been given to the House is unfair to those who are concerned with the administration of Singapore. Take, for instance, the question of removing the people from Singapore to this country to serve the remainder of their sentences. An admirable thing, but when I was there, after a long and exhausting journey in the Far East, I particularly and anxiously wanted to return to this country by ship instead of by plane; but there are just not the ships to bring the people over, even if they have priority. The accommodation on the ships is tremendously overcrowded, and people are waiting months and

months—people who have been out there a long time and who are wishing to rejoin their families in this country, people who have not committed any crime, and have every reason to get a passage back. They must be given priority over those sentenced to imprisonment.

Mr. Pritt: Why?

Dr. Guest: Because they have a prior claim. I consider that a man who has been serving his country in an honourable capacity, and doing good work, if he wishes to come back should have a prior claim over a man who is serving a sentence for a crime.

Dr. Morgan: There may be a miscarriage of justice, when the man has not been properly defended.

Dr. Guest: That matter can be raised, and I am glad that the hon. Lady has raised it this evening. I am putting the point of view of one who was out there. The Governor of Singapore at present is a man who was himself in prison under the Japanese, and he is the last man to be unjust to prisoners. I hope that point of view will be kept in mind as well as what the hon. Lady has put to the House.
Question put, and agreed to.
The Question having been proposed after Ten o'clock and the Debate having continued for half an hour, Mr. DEPUTYSPEAKER adjourned the House without Question put. pursuant to the Order made upon 13th November.
Adjourned at Twenty-seven Minutes past Eleven o'Clock.